Securitization specialists Demica plc completed a new research report focusing on trade receivables securitization and the role it can play for the German small-to-mid sized companies (or Mittelstand) and banks in a changing banking environment.

The report found that factors such as an economic slowdown and tightening credit policies along with the removal of the state guaranty for German Landesbanks (see ASR 8/8/04 ) have contributed to a 12.5% rise in bank finance costs. The capital markets provides a solution to this financing shortfall. When trade receivables assets are securitized, the bank becomes a finance arranger rather than a direct lender thereby reducing capital requirements because the banks have access to comprehensive and sensitive payment data, allowing for greater control over the asset status and therefore improved risk management, according to the report.

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