Lexicon - PCS

Introduction

Acronyms and technical terms abound in finance, as in many other areas of activity. They are certainly plentiful in securitisation and in this lexicon we have attempted to cover the most common (and some pretty arcane) expressions and acronyms used in the industry. Words of warning are in order though.

First, some of the expressions that appear here have legally set definitions in various jurisdictions. For example, “securitisation” in the European Union is a legally defined in article 2 of the Securitisation Regulation. Similarly, “asset-backed securities” are defined in the United States’ Dodd-Frank Act.

Where useful, we sometimes mention such legal definitions. But this lexicon seeks to give the “conversational” meaning of any expression. How the expression would be used by knowledgeable market participants writing or chatting about securitisation not by lawyers drafting a legally binding notice to a regulator.

Second, language is contextual and words have sometimes different meanings. For example, “asset backed security” or “ABS” may mean any type of securitisation funded by a bond. But it also can be used to differentiate some types of securitisations where the assets are consumer loans from others such as RMBS or CMBS. It is the old saw that amongst animals you have animals and men and amongst men you have men and women. Similarly, “issuer” should – as a technical and legal matter – refer to the special purpose vehicle that purchases the assets and issues the securities. Yet, it is universally also used as a colloquial way to refer to the “originator”. You will see or hear commonly expressions such as “Megabank is one of the largest issuers of RMBS in the US”. We have tried to account for such multiple usages. But it is important to keep these multiple meanings when using the lexicon.

Thirdly, securitisation is a complex and varied eco-system. Search long enough and you will find pretty much any feature you can imagine. Dictionary definitions are simplifications setting out the usual usage of words. Therefore, do not fret if you recall a securitisation where the word was not used in the manner suggested by this dictionary. That will happen,

Finally, the “Z” controversy. In the United States, securitisation is spelt “securitization”. We have opted throughout to spell it in the European fashion derived from United Kingdom English with an “S”.

Words and expressions in italics in a definition are words and terms that are defined in the Lexicon.

We have also sometimes provided “technical notes” following an entry to clarify for the specialists a point where the entry itself has simplified some aspect for the lay person’s better understanding.

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