66/YOUR MONEY OR YOUR LIFE!World countries - at least for those that still have not been excluded
from International financial markets. Securitisation is a key feature
of globalisation.
WHAT IS SECURITISATION?
The term is used to describe the new place of privilege occupied by
security issues in market activity. Security issues are traditional inter
national bonds issued by a foreign borrower on the financial markets
and in the currency of a given lender country. Or they may be Euro
bonds denominated in a currency other than the market for which
they are issued. Or they may be international stocks. In addition,
former bank debt has been converted into tradable securities - thus
freeing banks from their responsibilities to developing countries in the
wake of the debt crisis.
The sharing out of risk is the main feature of this securitisation
trend. In numerical terms, above all, since the risk of loan default is
not borne solely by a small number of multinational banks closely
linked to one another. In qualitative terms, too, since each element
of risk linked to a given issue can itself be the object of another
financial instrument that can also be traded on the markets.
Negotiable futures contracts exist, for example, to hedge against
currency and interest rate fluctuation; there are also options, which
are negotiable on the market; the list of such products goes on and on
(Adda, 1996).
The growth in securitisation is clearly illustrated by Table 5.1.
There was a strong increase in financial assets between 1980 and
- The total was multiplied by 3.5, from S10,706 billion to
S35.483 billion. As shown in Table 5.1, international and
government bonds posted the strongest growth, even if in absolute
terms currency and stocks remain on top.
The big financial players invest a growing share of their holdings
in the government bonds of the major industrialised countries and of
those Third World countries that have achieved a certain level of
industrial development. These Third World countries, in fact, have
the highest external debts in absolute terms.
Here are the 19960ECD figures for the most indebted Third World
countries in absolute terms: Mexico, S134.4 billion in 1995; China,
S125.3 billion; Thailand, $116.3 billion; South Korea, $113.5