When the global securitization market froze up as a result of sub-prime contagion in July 2007, many practitioners headed for the hills, assuming the game was over. But some diehards stuck it out, confident the structured finance market would one day return, albeit perhaps it in a different form. Their patience is now beginning to pay off.

Banks have arranged about $8.2 billion of commercial-mortgage bonds so far this year, according to Bloomberg data, compared with just $3.4 billion in the whole of 2009. Admittedly that falls a long way short of the $234 billion arranged in 2007, but it does hint of the recovery in a much maligned corner of the financial markets. In Canada too there are signs of recovery, according to a Globe & Mail article detailing how the market is evolving away from asset-backed commercial paper and towards longer-term asset-backed securities.

One person who did not give up on the market is Markus Krebsz, a London-based securitization expert who has worked for organizations including Fitch Ratings and Royal Bank of Scotland. Krebsz has taken advantage of the lean years to write a book covering just about every aspect of securitizaton.

Securitisation and Structured Finance Post Credit Crunch: A Best Practice Deal Lifecycle Guide, provides a comprehensive practical guide for market practitioners and incorporates lifecycle charts of structured products and detailed checklists. In the second half of the book, Krebsz explains how to use new-fangled analytical and risk-management tools from the likes of Principia and Bloomberg.

Even though securitization has been in the dog house since the global financial crisis - largely because it provided the raw material for the opaque and toxic instruments including collateralized debt obligations (CDOs), many of which were built on securitized and repackaged subprime home loans, that nearly brought down the global financial system - Krebsz is confident it still has any important role to play.

He believes that when securitization does properly return, sharp practice will have been all but eradicated. His hope, which borders on a plea, is that it will be characterized by "transparency, standardization and simplicity". Among other things, he predicts there will be much greater disclosure from bundlers and packagers of assets about the underlying quality of those assets.…

Unlock the rest of this article with a 14 day trial

Unlock with Email
Unlock with Google

Already have an account?
Login here