Speaking on the securitisation and the originate and distribute model, Thomas Huertas, FSA director of the banking sector underlined that the future of these models depend on actions banks and authorities will take.
Rating agencies may maintain their role, he said. However, “I suspect that investors will move much more to a ‘do-it-yourself’ model and expect much more in the way of due diligence and ongoing information provision from the investment banks that underwrite new securitisation issues”, Huertas said.
Banks will need to reform their own risk management practices, he said. The most significant problems over the past year have been associated with banks that originated but did not distribute.
“Banks will need above all to get two things right: first, build in the risk that really adverse events can occur and, second, take measures to protect themselves against these realistic disaster scenarios.”
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