Business and Personal Finance Dictionary

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• SECURITIZATION CONDUIT
  
  A Special Purpose Vehicle (SPV) (q.v.), with a remote chance of bankruptcy, that a bank forms. The Conduit purchases or originates loans and finances them with various sorts of Asset Backed Securities (q.v.). The underlying loans provide the collateral for the ABS's. Typically, the sponsoring bank guarantees the payments of the ABS's, which the security holders demand. The guarantee may come from a standby letter of credit or from the bank's purchase of the Conduit's junior securities. In return for its guarantees, the bank receives the residual coupon spread of the underlying securities over that of the conduit's securities.
  
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