Securitisation : Instruments and Implications

Securitisation activity expanded spectacularly prior to the burst of the 2007/2008 credit turnmoil. New instruments were developed and were used by more agents in an unprecedented number of countries. These changes have altered the functioning of financial markets and the role of banks therein. The changing role of banks due to securitisation had implications on banks' incentives and abilities to manage risks, grant credit and react to monetary policy impulses. The turnmoil in credit markets brought to the fore a number of features of the securitisation markets which could impair the functioning of credit markets in times of strain