Abstract
M.Comm.
Securitisation and asset-backed securities are established lending and
investment concepts internationally. It changed the manner in which
lending is facilitated and the funding of banks and finance entities other
than banks are managed, thereby transforming lending into packaged
tradeable debt paper in which investors invest directly. Capital
requirements introduced on banks worldwide by the Bank of International Settlements created pressure on margins, which led to banks finding
ways through financial engineering in substituting margin income with fee
income to better manage their balance sheets and minimum capital
requirements for the purpose of capital adequacy. South African Banks
are characterised by high infrastructure costs compared with international
banks, where technology has been utilised in optimising operating
logistics. Foreign banks operate on much narrower margins and are reentering
the South African economy which creates an element of threat
to South African banks. This creates the need for more innovative
funding strategies for both South African banks and finance entities that
operate in the grey market in improving competitiveness. Securitisation
and asset-backed securities offers this potential, but is underdeveloped
in South Africa due to bank legislation and legislation pertaining to
tradeable debt paper being derived from the commercial paper and
debenture schedule. Only two securitisation and asset-backed security
issues have been conducted in South Africa, which creates questions as
to why securitisation and asset-backed securities are not actively being
practised and, if there is potential for securitisation and asset-backed
securities to evolve and be practised by banks and financiers, what
prevents it from being developed as seen internationally? The objective
of the study is to explain the mechanics of securitisation and assetbacked
securities, what the developments in South Africa have been,
what the problems are in South Africa, relating to securitisation and
asset-backed securities, and how these problems could be alleviated
based on recent developments internationally. The study is one of
literature and discussions held with professional people.