Self-securitisation is the process by which a bank securitises some of its loans to create securities for itself, all securitiees displaying the same specificities. The purpose of creating these securities is for the securitising bank to transfer them later to the central bank in order to get money from the central bank.

a) Represent the changes in the balance sheet of the self-securitising bank, and the changes in the balance sheet of the SPV during self securitisation. Assume that the SPV has an account in the securitising bank.

(2 marks)

b) Explain why the SPV actually did not need a bank account during the self-securitisation.

(1 mark)

c) Represent the changes in the balance sheet of the securitising bank and the changes in the balance sheet of the central bank when the bank transfers the securities to the central bank to get money from the central bank.

(2 mark)

d) Explain how the whole process is equivalent for the bank to get money from the central bank in exchange for its loans. Why is self-securitisation of loans to provide liquidity more acceptable for the central bank than accepting bank loans onto its balance sheet?

(1 mark)