商業(yè)銀行管理英文課件：第9章 Risk Management Asset-Backed Securities,Loan Sales,Credit Standbys,and Credit Derivatives

1、Chapter NineRisk Management: Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit DerivativesCopyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Key TopicsThe Securitization Process Securitizations Impact and Risks Sales of Loans: Nature and Ris

2、ks Standby Credits: Pricing and Risks Credit Derivatives and CDOs Benefits and Risks 9-2Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.IntroductionMany issues such as credit risk and the burden of having to raise new capital to meet the funding needs o

3、f your customers and satisfy regulatory standards keep managers busyNew tools such as securitizing loans, selling loans off balance sheets, issuing standby letters of credit, and participating in credit derivative contracts can help with risk management Not only have these tools attempted to control

4、 risk more effectively, but they have also opened up new sources of fee incomeAs the great credit crisis of 2007-2009 emerged we also learned that these new risk-management tools carry significant limitations, including unexpected risks and extreme complexity, that can overwhelm unprepared financial

5、 institutions and wreak havoc with the financial system9-3Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loans and Other AssetsSecuritization of loans and other assets is a simple idea for raising new fundsRequires a lending institution to

6、 set aside a group of income-earning, relatively illiquid assets, such as home mortgages or credit card loans, and to sell relatively liquid securities (financial claims) against those assets in the open marketIn effect, loans are transformed into publicly traded securitiesThe lender whose loans are

7、 securitized is called the originatorThese loans are passed on to an issuer, who is usually designated a special-purpose entity (SPE)The SPE is separated from the originator to help ensure that, if the originating lender goes bankrupt, this event will not affect the credit status of the pooled loans

8、, supposedly making the pool and its cash flow “bankruptcy remote” 9-4Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display. (1).Pass-through securities（過手證券）Its ownership belongs to the investors, the debt obligations No longer belongs to the originator ,Don

9、t reflect on its balance sheet, but the off-balance sheet processing.A major feature of pass-through securities is：The portfolio in the asset pool can be repay at any time prior to the expiration date by the debtor with impunity, so that the cash flow is uncertain.(1).Pass-through securities（過手證券）(2

10、)Asset-backed securities（資產(chǎn)支持證券） Asset-backed securities are debt obligations of the originator, as collateral asset portfolio, generally reflected on the originators balance sheet, but the cash flow generated by the mortgaged property isnt must be for the payment of principal and interest of the as

11、set-backed securities, other income of the originator also can be used to pay the principal and interest. (2)Asset-backed securities（資產(chǎn)支持證券） (3)collateral mortgage obligations， CMOs（抵押擔(dān)保證券） Collateral mortgage obligations is a multi-level transfer securities, its core technology is the use of long-t

12、erm, pay a monthly mortgage cash flow to create short, medium and long-term different levels of securities. 。 The participants of asset securitization 1originator (也稱原始權(quán)益人 ) Responsibility：To determine the underlying assets, and sale to SPE. Originators are mainly financial companies, commercial ban

13、ks, savings institutions, computer companies, airlines, manufacturing companies, insurance companies and securities firms, etc .2issuer (special purpose entity SPE) Responsibility： Buy underlying assets from the originator according to the actual sales standard, responsible for the recombination of

14、assets, credit enhancement institutions entrusted or oneself credit enhancement on underlying assets, employ the rating agencies, select service people, trustee as trading service agencies, and choose the underwriter to issue the asset-backed securities. Securitizing Loans and Other Assets3Servicer

15、(Often the originator)Responsibility：Be entrusted manage the underlying asset , Supervision of the debtor to perform the contract, charge its due principal and interest, and recover the overdue accounts receivable and other related activities. Service people can usually be made by the originator or

16、its affiliated company. 4Security underwriter Responsibility： The underwriters are responsible for arranging the first issue of securities and at the same time to monitor and support the securities in the secondary market trading5credit rating agenciesResponsibility： To rating asset-backed securitie

17、s, establish credit standards for investors, at the same time its strict rating procedures and standard provides the best protection for investors 6credit enhancement agencies Responsibility：Reduce the risk of asset-backed securities, improve the quality rating of asset-backed securities, improve it

18、s pricing and capacity, reducing distribution costs. Generally by the issuer or a third party.7trustee Responsibility： Collect and keep records the cash income from asset portfolio, after deducting certain service charge, to pay the principal and interest to investors of asset-backed securities. 8In

19、vestors Investment asset-backed securities investors typically include Banks, insurance companies, pension funds, investment funds, other companies and a handful of retail investors.Other Participants Provide consulting and related services, such as accounting firms, law firms and other institutions

20、.EXHIBIT 91 The Heart of the Securitization Process9-14Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loans and Other Assets (continued)A credit rating agency rates securities to be sold so that investors have a better idea what the new fi

21、nancial instruments are worthPossible moral hazard problemThe issuer then sells securities in the money and capital markets, often with the aid of a security underwriter (investment banker)A trustee is appointed to ensure the issuer fulfills all the requirements of the transfer of loans to the pool

22、and provides all the services promised investorsA servicer (who is often the loan originator) collects payments on the securitized loans and passes those payments along to the trustee, who ultimately makes sure investors who hold loan-backed securities receive the proper payments on timeInvestors in

23、 the securities normally receive added assurance they will be repaid in the form of guarantees against defaultCredit enhancerLiquidity enhancer9-15Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.The operating process of asset securitizationEXHIBIT 92 Ke

24、y Players in the Securitization Process: Cash Flows and Supporting Services That Make the Process Work and Generate Fee Income9-17Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loans and Other Assets (continued)The concept of securitizatio

25、n began in the residential mortgage market of the United StatesThree government-sponsored enterprises (GSEs) worked to improve the salability of residential mortgage loansThe Government National Mortgage Association (GNMA, or Ginnie Mae)The Federal National Mortgage Association (FNMA, or Fannie Mae)

26、The Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac)Unfortunately for Fannie Mae and Freddie Mac the long-range outlook for their growth and survival is questionable due to recent record defaults on many of the home loans they traded9-18Copyright 2013 The McGraw-Hill Companies, Inc. Pe

27、rmission required for reproduction or display.Securitizing Loans and Other Assets (continued)Beginning in the 1980s, with the cooperation of First Boston Corporation (later a part of Credit Suisse), a major security dealer, Freddie Mac developed a new mortgage-backed instrument in which investors we

28、re offered different classes of mortgage-backed securities with different expected payout schedulesThe collateralized mortgage obligation (CMO) CMOs typically were created through a multistep process in which home mortgage loans are first pooled together, then GNMA-guaranteed securities are issued a

29、gainst the loan pool and ultimately offered to investors around the globeThese securities were placed in a trust account off the lenders balance sheet and several different classes of CMOs issued as claims against the security pool and the income they were expected to generate9-19Copyright 2013 The

30、McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loans and Other Assets (continued)Each class of CMO known as a tranche promises a different rate of return (coupon) to investors and carries a different risk exposure The different security tranches normally rec

31、eive the interest payments to which they are entitledThe loan principal payments flow first to security holders in the top (senior) tranche until these top-tier instruments are fully retiredSubsequently principal payments then go to investors who purchased securities belonging to the next tranche un

32、til all securities in that tranche are also paid out, and so on down the “waterfall” until payments are made to investors in the last and lowest trancheThe “senior” tranches of a CMO generally carry shorter maturitiesReduces their reinvestment risk exposureAttractive to risk-averse investors9-20Copy

33、right 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.EXHIBIT 93 The Structure of Collateralized Mortgage Obligations (CMOs)9-21Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loans and Other Assets (con

34、tinued)Examples of Types of Securitized AssetsResidential Mortgages the beginnings of securitizationThe role of GSEs (GNMA, FNMA, FHLMC)Riskier CMOsHome Equity LoansAutomobile Loans Commercial MortgagesSmall Business Administration LoansMobile Home LoansCredit Card ReceivablesTruck LeasesComputer Le

35、ases9-22Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.EXHIBIT 94 Securitization Activities of FDIC-Insured Depository Institutions, 20109-23Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loa

36、ns and Other Assets (continued)Advantages of SecuritizationDiversifies a banks credit risk exposureCreates liquid assets out of illiquid assetsTransforms these assets into new sources of capitalAllows the bank to hold a more geographically diversified loan portfolioAllows the bank to better manage i

37、nterest rate riskAllows the bank to generate fee income9-24Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Securitizing Loans and Other Assets (continued)Securitization has increased regulators concerns about the soundness and safety of individual lende

38、rs and the financial system, especially in the wake of the 20072009 credit crisisRegulators today are looking closely atThe risk of having to come up with large amounts of liquidity in a hurry to make payments to investors holding asset-backed securities and cover bad loansThe risk of agreeing to se

39、rve as an underwriter for asset-backed securities that cannot be soldThe risk of acting as a credit enhancer and underestimating the need for loan-loss reservesThe risk that unqualified trustees will fail to protect investors in asset-backed instrumentsThe risk of loan servicers being unable to sati

40、sfactorily monitor loan performance and collect monies owed lenders and investors9-25Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Sales of Loans to Raise Funds and Reduce RiskLoan sales are carried out today by financial firms of widely varying sizes

41、Among the leading sellers of these loans are Deutsche Bank, JP Morgan Chase, the Bank of America, and ING Bank of the NetherlandsOnly a minority of U.S. depository institutions report regular and significant asset salesThese are concentrated among residential mortgage credits and other miscellaneous

42、 loans extended primarily to the household sectorMost loans sold in the open market usually mature within 90 days and may be either new loans or loans that have been on the sellers books for some time9-26Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.S

43、ales of Loans to Raise Funds and Reduce Risk (continued)Usually the seller retains servicing rights on the sold loans, enabling the selling institution to generate fee income by collecting interest and principal payments from borrowers and passing the proceeds along to loan buyersServicing instituti

44、ons also monitor the performance of borrowers and act on behalf of loan buyers to make sure borrowers are adhering to the terms of their loansMost loans are purchased in million-dollar units by investors that already operate in the loan marketplace and have special knowledge of the debtor9-27Copyrig

45、ht 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Sales of Loans to Raise Funds and Reduce Risk (continued)Types of Loan SalesParticipation LoansWhen an outside party purchases a loanThey generally have no influence over the loan termsAssignmentsOwnership of the

46、 loan is transferred to the buyer of the loanThe buyer has a direct claim against the borrowerLoan StripShort-dated pieces of longer term loans, maturing in a few days or weeksTwo of the most popular forms of loan sales are participation loans and assignments9-28Copyright 2013 The McGraw-Hill Compan

47、ies, Inc. Permission required for reproduction or display.EXHIBIT 95 The Impact of Loan Sales9-29Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.EXHIBIT 96 Assets Sold With Recourse and Not Securitized by FDIC-Insured Depository Institutions, 20109-30Co

48、pyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Sales of Loans to Raise Funds and Reduce Risk (continued)Reasons behind Loan SalesWay to rid the bank of lower-yielding assets to make room for higher-yielding assets when interest rates rise Way to increase

49、 the marketability and liquidity of assetsWay to eliminate credit and interest rate riskWay to generate fee incomePurchasing bank can diversify loan portfolio and reduce risk9-31Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Sales of Loans to Raise Fun

50、ds and Reduce Risk (continued) The Risks in Loan Sales Best quality loans are the easiest to sell which may increase volatility of earnings for the bank which sells the loansLoans purchased from another bank can turn bad just as easily as one from their own bankLoan sales are cyclical9-32Copyright 2

51、013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Standby Credit Letters to Reduce the Risk of Nonpayment or NonperformanceFinancial guaranteesInstruments used to enhance the credit standing of a borrower to help insure lenders against default and to reduce the borr

52、owers financing costsDesigned to ensure the timely repayment of the principal and interest from a loan even if the borrower goes bankrupt or cannot perform a contractual obligationOne of the most popular guarantees is the standby letter of credit (SLC)SLCs may includePerformance guaranteesA financia

53、l firm guarantees that a project will be completed on timeDefault guaranteesA financial firm pledges the repayment of defaulted notes when borrowers cannot pay9-33Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Standby Credit Letters to Reduce the Risk

54、of Nonpayment or Nonperformance (continued)Key Advantages to Issuing SLCsLetters of credit earn a fee for providing the service (usually around 0.5 percent to 1 percent of the amount of credit involved) They aid a customer, who can usually borrow more cheaply when armed with the guarantee, without u

55、sing up the guaranteeing institutions scarce reserves. Such guarantees usually can be issued at relatively low cost because the issuer may already know the financial condition of its standby credit customerThe probability usually is low that the issuer of an SLC will ever be called upon to pay9-34Co

56、pyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Standby Credit Letters to Reduce the Risk of Nonpayment or Nonperformance (continued) Standbys have become important financial instruments for several reasonsThe spread of direct finance worldwide, with some

57、 borrowers selling their securities directly to investors rather than going to traditional lendersThe risk of economic fluctuations has led to demand for risk-reducing devicesThe opportunity standbys offer lenders to use their credit evaluation skills to earn additional fee income without the immedi

58、ate commitment of funds The relatively low cost of issuing SLCs they carry zero reserve requirements and no insurance fees9-35Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.Standby Credit Letters to Reduce the Risk of Nonpayment or Nonperformance (cont

59、inued)SLCs contain three essential elementsA commitment from the issuer (often a bank or insurance company today)An account party (for whom the letter is issued)A beneficiary (usually a lender concerned about the safety of funds committed to the account party)The key feature of SLCs is they are usua

60、lly not listed on the issuers or the beneficiarys balance sheetThis is because a standby is only a contingent liabilityIn most cases it will expire unexercised9-36Copyright 2013 The McGraw-Hill Companies, Inc. Permission required for reproduction or display.EXHIBIT 97 The Nature of a Standby Credit