© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
If a financial institution sells asset-backed securities, it buys loans from lenders such as banks and uses the loans as backing for bonds. The financial institution takes the repayments on these loans and uses them to pay interest to investors who buy the bonds, and to repay the bonds. Lenders sell their loans in this way in order to improve their financial situation and to make more loans. 
A financial security which uses any asset, including loans, leases, credit card debt, company receivables or royalties, as collateral. 
Securities, such as bonds or notes, that are collateralised by loans or receivables held by banks, credit card companies and other credit providers.