Securitisation: How Innovation is Leading the Revival

The securitisation market all but came to a halt in the global financial crisis. Following the US sub-prime meltdown, residential mortgage-backed securities (RMBS) were on the nose for investors who considered them opaque and high-risk, with some insisting they should be banned. One of the problems was how RMBS risks were rated, being based on defaults in the underlying investments, rather than the volatility of the market. But the shock of the crisis not only raised questions, it kicked off innovation. With a securitisation revival underway, it seems reports of its death were greatly exaggerated.