[PDF] Regulation (EU) 2017/2402 of the European Parliament and of the

Did securitization contribute to the financial crisis?

Securitization, specifically the packaging of mortgage debt into bond-like financial instruments, was a key driver of the 2007-08 global financial crisis. Securitization fueled excessive risk-taking that brought many major financial institutions on Wall Street and around the world to their knees when the U.S. real estate bubble burst.

What is the meaning of securitization?

Securitization refers to the process of converting debt (assets, usually illiquid assets) into securities, which are then bought and sold in the financial markets. If you notice, the first line calls debt as an asset.

Who bears the risk of bad debts in securitization?

The risk of bad debt, however, can be split up in different proportions among the investors. Depending on how the securitized instruments are structured, the risk can be placed entirely on a single group of investors, or spread throughout the entire investing pool.

What is securitization theory?

Securitization theory explains how political actors and elites declare an issue to be an existential threat to legitimatize whatever practices necessary to combat the emergent risk (Wæver 1995).