Processes of pooling in assets and repacking them into securities and selling them to Investors
- banks can pool various financial assets (mortgages, loans and other receivables) and convert them into securities with this process
- these are sold the investors, creating additional liquidity in the market
Examples
Mortgage-Backed Securities
- created by pooling home loans
- sold to investors
- investors earn interests from these MBS from the underlying loans1
Asset-Backed Securities
- using other assets like credit card receivables, auto loans or student loans