Asset securitization is one of the main techniques for raising funds and dealing with the liquidity problem in the global financial markets. So, how can Virtual Data Room automate this process?
Virtual Data Room for Asset-Backed Securities
A prerequisite for the securitization of assets is the choice of the type of securities that will be issued as a result of the transaction. In this case, the security aspect is the most important, thus asset-backed securities Virtual Data Room was organized. Based on the choice made, it becomes possible to determine the structure of future payments for securities and, accordingly, to build a financial model of the issue.
Recently, there has been a rapid development of both the banking sector and the banking system as a whole. This forces banks to look for various ways of refinancing to maintain liquidity, which today is not an easy task, since the level of liquidity a bank has depends on its activities in attracting loans. For most banks, this is the easiest way to generate income, therefore, today various financial innovations and instruments are being actively introduced into banking practice, among which the securitization of bank assets has become the most popular in recent years. In general, asset securitization is the process of converting illiquid financial assets such as loans and mortgages into marketable securities. The process is a modern technique for raising funds by issuing securities backed by assets (Asset-Backed Securities (ABS)) or mortgage loans (Mortgage-Backed Securities).
Securitization theoretically has a risk prevention mechanism, and practically everything depends on the quality and liquidity of the secured assets. It should be noted that banks and credit organizations are also particularly interested in securitization, as this allows them to increase the turnover of financial resources, asset portfolio and redirect funds from securitization to new lending, thereby increasing the profitability of the portfolio and, in general, the company.
The top of the best Virtual Data Room providers
ABS are short-term assets, which, unlike, for example, those guaranteed by US government agencies MBS bear certain credit risk, although the uncertainty of early repayment and cash flows in their case is lower. In world practice, more and more attention is paid to financial engineering, one of the forms of which is the securitization of banking assets.
To minimize the risks arising from securitization, a due diligence procedure is necessary. To provide the evaluation more productively, many companies use Virtual Data Room software that provides a secure collaborative tool and a digital repository for confidential business data.
Among the most common Data Room providers for ABS are:
The implementation of the Data Room qualitatively changes the document flow process during ABS in the organization and provides the following advantages:
- reduction of the time required to search for the required documents due to end-to-end search across the corporate database;
- reducing labor intensity and increasing the efficiency of interaction between various departments;
- increasing the efficiency of interaction between various departments;
- improvement of the system of administration and control of the document processing process;
- reducing the time of delivery of management information: orders, orders, instructions;
- reducing the risk of losing documents;
- reducing the number of paper documents in the company’s workflow by scanning all incoming and outgoing documents;
- increasing the security of storing documents by introducing authorized access to the system, taking into account the access roles and employee rights to this information.