Robin Hood Finance Limited

benefits - Why securitise?

It can be a good deal more complicated than taking out a loan, so why bother?

  1. Asset and liability matching. This is a very valuable feature, which many commentators on the Northern Rock affair got completely wrong. It was not possible for Northern Rock to have a liquidity crisis caused by securitisation, since the bonds have a maturity as long as the underlying assets. It was the other, non-securitisation funding which caused the problem.
  2. Cheaper funding
    Securitisation can in some cases cut the cost of funding
  3. Alternative funding
    Some firms are entirely dependent on their banks for funding, and see some diversification as prudent, or in some cases the only way of obtaining funding.
  4. Access to the capital markets:
    Most firms do not have the high credit rating from an external agency which is required to fund in the capital markets

In the case of banks, there is the additional point about managing regulatory capital. For some assets, even under the Basel II regime, there is a distinct lowering of capital requirement, which means improved capital efficiency and better returns

Securitisation is far from being ideal in all cases, even in less stressed markets. We are here to help our customers to decide what is best for them, then help them get it; not to push a product.

It is important to remember that a bank’s starting point is what is good for that bank, as many firms have discovered in recent difficult times. RHF’s starting point is what is good for the customer.