~&Securitisation in Europe &~ "Securitisation is a mechanism whereby specific, illiquid financial assets are converted into negotiable securities on the capital markets. It is growing in popularity and has become a widely used method of commercial financing throughout the world. Europe is at the forefront of this trend, with the continued growth and expansion of securitisation markets generating significant benefits and good returns for issuers, investors, securities dealers, national governments and public authorities. However, members of the European Securitisation Forum believe that, given the continued growth and expansion of European securitisation markets, significant advances and improvements in transaction reporting are needed. In this document, the term “transaction reporting” refers to the calculation and periodic (normally monthly) dissemination of post-issue performance reports for securitisation transactions. Such transaction reporting is generally divided into two parts: - Information at the level of the underlying portfolio, concerning the characteristics and performance of the receivables and other financial assets that are the source of payments from securitisation transactions. - Information at the level of the security itself, concerning the allocation and distribution of these cash flows to holders of different tranches of securities, in accordance with their payment priorities and characteristics. Securitisation market participants rely on transaction reporting as their primary source of information for analysing, pricing, trading and settling mortgage-backed and asset-backed securities in the primary and secondary markets. As such, transaction reporting can be likened to periodic financial reporting provided to the market by issuers of traditional debt and equity securities. Just as recent results are important for assessing the value of an entity's debt or equity securities, transaction reporting is necessary for assessing the past performance and future prospects of securitised financial instruments. Investors and traders value the availability and quality of transaction reporting in determining whether and at what level to invest or hold markets in these securities. Transaction reporting also provides essential information for the allocation and distribution of principal and interest funds necessary for the clearing and settlement of securities.

Deregulation, disintermediation and financial globalisation are well-known components of the current transformation of credit structures. Less well known than the previous phenomena, but inseparable from this transformation, securitisation is most often considered a financial engineering technique. Since the 1970s, mortgage securitisation has been hugely successful in both developed and developing countries. More recently, Morocco, Malaysia and Jordan have adopted the legal instruments necessary for the development of this new financial technique, which has the major advantage of providing banks and financial institutions with new sources of financing. ~&From an economic perspective&~ The securitisation technique aims to transform ‘illiquid’ mortgage loans into negotiable and liquid securities intended to be sold to investors on the financial market. The purpose of securitisation is to transform debt portfolios into securities. It involves a bank or financial institution selling some or all of its first-rank mortgage-backed debt to another securitisation entity, which in turn transforms it into marketable securities, thereby contributing to the development of the financial market.

~From the investor's perspective~ The securitisation process transfers the credit risk from the seller (transferor institution) of receivables to the assets sold. Investors gain greater assurance because they no longer have to worry about the creditworthiness of the originator, but only about the creditworthiness assigned to the pool of assets held by the securitisation entity. The financial health of the originator is only a concern if it relates to its ability to act as the designated agent for the management and collection of the transferred receivables once they have been securitised. ~&From the banker's point of view&~ The financing of mortgage receivables is normally provided as a last resort by investors who invest in securities issued on the market by the securitisation entity. In this case, banks and financial institutions have the opportunity, on the one hand, to focus their efforts on functions, such as the production of mortgage loans for households, for which they have a competitive advantage and, on the other hand, to take on the type or level of risk that offers the best risk/return ratio for their own portfolio. This reduces costs and facilitates risk management.

~&From an operational perspective&~ Credit risk monitoring and credit enhancement in securitisation transactions contribute to greater transparency regarding loan quality, a feature that was sometimes lacking for depositors and third parties. Securitisation transactions are often characterised by two types of significant innovation: product and process. The first type has given rise to a whole range of new financial products, as it is not limited to mortgage loans but also covers other types of debt. The second type involves a profound reorganisation of the existing banking system. In addition to enhancing the above-mentioned financing method, securitisation should enable banks and financial institutions to remove debts from their balance sheets, which can be very attractive, especially for a bank whose total loans reach a significant level of equity capital, by transferring them to the securitisation entity, which in turn transforms them into marketable securities. Through this technique, the transferring institution can achieve two essential objectives, namely: the reorganisation of assets and investment in new mortgage loan portfolios, while complying with the prudential rules laid down by Bank of Algeria. In addition, the implementation of a securitisation system aims, first and foremost, to mobilise savings for the financing of investments in the real estate sector and, secondly, to stimulate the capital market and transform illiquid assets (receivables) into marketable securities. Another particularly interesting benefit is the refinancing of banks and financial institutions in need of long-term liquidity. This technique therefore allows financial institutions to free themselves from the constraint of term mismatches between resources and uses, but also to multiply their financing capacity without having to worry about the level of their own funds. This represents exceptional leverage. By selling their receivables, banks and financial institutions are able to restart the machine and offer households other types of credit. However, their role does not end with the granting of credit, as they continue to manage the process by collecting repayments from debtors (households). Finally, the success of securitisation depends, among other things, on two conditions: the first is the existence of a well-performing financial sector, and the second is the existence of a primary mortgage market capable of generating large volumes of high-quality, highly standardised mortgage loans.