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Securitization
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A process by which a loan, originally made by a bank or other financial intermediary, is converted into a security to increase its liquidity as a financial instrument and to reduce the financial intermediary's capital requirements (disintermediation). Securitization may involve the sale of loans (with or without recourse to the originating lender) or issuance of stand-by letters of credit and loan commitments. While securitization increases the liquidity of relatively standardized loans, it may increase the intermediary's role as a depository or holder of last resort for illiquid and relatively risky loans. Also called Liquid Asset-Backed Securities (LABS), Securitized Receivables. See Structured Financial Transaction (1). See also Disintermediation, Pass- through Securities.
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