Cryptocurrency Q&A Which is a disadvantage of securitization?

Which is a disadvantage of securitization?

Michele Michele Fri Aug 30 2024 | 5 answers 840
Could you elaborate on the potential drawbacks of securitization? Specifically, which aspect of the process do you believe poses the greatest disadvantage, and how does it negatively impact investors, borrowers, or the overall financial system? Is there a specific scenario or historical example that highlights this disadvantage? Additionally, are there any regulatory measures in place to mitigate these risks? Which is a disadvantage of securitization?

5 answers

Enrico Enrico Sun Sep 01 2024
Securitisation, while an effective means of accessing long-term capital, is not without its drawbacks. One significant disadvantage lies in its complexity and associated costs, which can be substantial. However, it is generally considered less expensive than a full share flotation, making it an attractive option for some businesses.

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BlockchainLegendary BlockchainLegendary Sun Sep 01 2024
Another disadvantage of securitisation is the potential impact on a company's future fundraising abilities. By securitising assets, a business may limit its flexibility in accessing additional capital through traditional means, such as bank loans or bond issuance.

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Eleonora Eleonora Sun Sep 01 2024
Moreover, securitisation can also introduce risks related to the underlying assets. If the performance of these assets deteriorates, it can negatively impact the value of the securities issued, potentially leading to losses for investors.

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Michele Michele Sat Aug 31 2024
Additionally, securitisation can be a time-consuming process, requiring extensive due diligence and legal work. This can delay the availability of funds, which may not be suitable for businesses with urgent capital needs.

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EnchantedPulse EnchantedPulse Sat Aug 31 2024
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