•  The development of asset backed securities and the vast array of financial instruments built on them (indices, derivatives, etc. ), has made bank loans tradable. This has decreased their cost, by reducing the illiquidity premium, and has contributed to the narrowing of spreads and the generally favourable credit conditions we have witnessed in the past few years.
Overall, securitization has freed up banks’ capital, which has been used to back new loans. Now that it is possible to trade loans, pent-up demand for credit risk has found an outlet.