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European Tribune - LQD: Securitisation Redux
Investment banks, including Goldman Sachs and Barclays Capital, are inventing schemes to reduce the capital cost of risky assets on banks' balance sheets, in the latest sign that financial market innovationregulatory arbitrage is far from dead.
There, fixed it.

Also known as "creative accounting".

I remember when "financial engineering" was a term of abuse (Spain in the early 1990's).

I mean, I have a technical book by a leading expert which plainly states that one of the main motivations for securitisation is to sidestep regulation. As I quoted in another thread:

There are four principal reasons why a corporation may elect to raise funds via a securitization rather than a corporate bond. They are:
  1. The potential for reducing funding costs
  2. To diversify funding sources
  3. To accelerate earnings for financial reporting purposes
  4. For regulated entities, potential relief from capital requirements

A man of words and not of deeds is like a garden full of weeds; a man of deeds and not of words is like a garden full of turds — Anonymous
by Migeru (migeru at eurotrib dot com) on Mon Jul 6th, 2009 at 09:23:01 AM EST

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