Securitisation Training Course: Asset Pools, Tranching, Credit Enhancement and Waterfalls

Programme Summary

Securitisation is the subject of this one-week training course for bankers, treasurers and finance leaders at managerial level, ending in a structuring term sheet and risk assessment for one asset pool. Converting loans or receivables into rated notes can lower funding cost and free capital, but only when the pool, the tranches and the legal separation are designed with care. The programme moves from principles, through diagnosis of the pool and its risks, to design of tranching and credit enhancement, then to application. Mars Training Centre UK delivers this securitisation programme for mixed organisations.

The Business Case

Securitisation turns illiquid assets into tradable funding, yet its terms are technical and errors are costly once notes are issued. Leaders who can read a data tape, test a waterfall and challenge an accounting conclusion decide earlier whether a transaction suits their balance sheet and investors.

• Funding Cost: Falls as pool quality and credit enhancement are matched to investor demand.
• Capital Efficiency: Improves as risk transfer is tested against the capital rules before launch.
• Execution Risk: Reduces as legal, accounting and servicing issues are settled in advance.

Principles and Evidence Base

• IFRS 9 Financial Instruments: It sets the derecognition tests for transferred assets examined in Session 4.
• IFRS 10 Consolidated Financial Statements: It frames the assessment of control over a securitisation vehicle in Session 4.
• IFRS 12 Disclosure of Interests in Other Entities: It guides the disclosures about structured entities reviewed in Session 4.
• Basel Committee securitisation framework: It shapes the capital treatment and risk transfer analysis in Sessions 3 and 4.

Intended Participants

• Treasurers who arrange funding and decide whether to sell or retain assets.
• Credit and risk officers who assess pool quality and counterparty exposure.
• Finance managers who account for transferred assets and report capital.
• Investment analysts who evaluate notes and compare tranche returns.

The programme serves banks, leasing companies, trade finance providers and public financial institutions.

Learning Outcomes

1. Participants will be able to evaluate the cash flow characteristics of a loan or receivables pool.
2. Participants will be able to diagnose concentration, performance and servicing risks in a data tape.
3. Participants will be able to construct a tranche structure with subordination and credit enhancement.
4. Participants will be able to justify a priority of payments and trigger design.
5. Participants will be able to prioritise accounting, capital and legal issues for a proposed transaction.
6. Participants will be able to design a structuring term sheet and risk assessment for one asset pool.

Programme Structure

Day 1: Securitisation Principles, Parties and Legal Separation

How does a pool of assets become a funding source separate from its originator?

• Securitisation Process Map
• Special Purpose Vehicle Structure Chart
• True Sale and Legal Isolation Checklist
• Originator, Servicer and Trustee Roles
• Asset Class Comparison for Loans and Receivables

Day 2: Diagnosing the Asset Pool and Its Cash Flows

What do the pool data say about expected losses, timing and concentration?

• Data Tape Review
• Delinquency and Default Curve Analysis
• Prepayment and Recovery Assumptions
• Concentration and Eligibility Criteria Testing
• Servicer Performance Scorecard

Day 3: Designing Tranching, Credit Enhancement and Waterfalls

How are losses and cash allocated between senior and junior investors?

• Tranche Sizing and Subordination Model
• Excess Spread and Reserve Account Design
• Overcollateralisation and Trigger Rules
• Priority of Payments Waterfall
• Rating Agency Approach Briefing

Day 4: Assessing Accounting, Capital and Investor Risk

Does the transaction achieve the accounting, capital and investor outcomes intended?

• Derecognition Test Worksheet
• Consolidation Control Assessment
• Risk Transfer and Capital Impact Analysis
• Note Pricing and Spread Comparison
• Investor Reporting and Disclosure Review

Day 5: Applying Securitisation to One Asset Pool

Is the term sheet and risk assessment ready for committee approval?

• Applying the Session 2 Data Tape Review to the Chosen Pool
• Testing the Session 3 Waterfall under Stress
• Matching Session 4 Accounting Conclusions to the Structure
• Rehearsing the Credit Committee Presentation
• Completing the Structuring Term Sheet and Risk Assessment

Methodology

The programme uses a data workshop method built on anonymised pool tapes, offering summaries and servicer reports. Participants analyse the pool, size tranches and run waterfalls in small groups, then compare structures with peers and the facilitator, who gives feedback on every work product before it enters the final term sheet.

• Suggested activity: Reviewing a sample data tape and ranking the three largest risks.
• Suggested activity: Sizing a senior and junior tranche and testing the result under a loss scenario.
• Suggested activity: Completing a derecognition worksheet and recording the judgements made.

Capstone Output

Each participant completes a structuring term sheet and risk assessment for one asset pool. It holds a pool summary, a tranche and enhancement table, a priority of payments, a stress result and an accounting and capital note. The document is used to brief a credit committee and agree the next steps with advisers.

Frequently Asked Questions

Is securitisation suitable for finance staff who have not worked on a transaction?

Yes. Securitisation is taught from the pool and the parties upwards, assuming familiarity with loans, receivables and basic financial statements, not prior deal experience.

Which standards does securitisation rest on?

Securitisation rests on IFRS 9, IFRS 10 and IFRS 12 for accounting and disclosure, and on the Basel Committee securitisation framework for capital.

How is the term sheet from securitisation used at work?

You use the structuring term sheet and risk assessment from securitisation to brief your credit committee and agree the next steps with legal and rating advisers.

How does securitisation differ from a programme on project finance?

Securitisation funds a pool of existing assets through tranched notes, while project finance funds a single new asset from its own future revenues.