By C Ian Twinn of the Bank’s Economics Division.
Since the first issue in 1985, the UK asset-backed securities market has grown to become the second largest in the world after that in the United States. This article examines the factors behind the market’s development to date and assesses its prospects. It analyses the incentives for issuers and investors to participate, and outlines the mechanics of securitisation and the regulatory framework that influences the market. It also considers the advantages of - and the risks inherent in - asset-backed securities.