Tuesday, October 28, 2008

European securitisation and the possible revival of financial innovation

(John Kiff Paul Mills Carolyne Spackman in VoxEU) Securitisation volumes have plummeted in the wake of the subprime crisis. As a result, banks are keeping more loans on their balance sheets and tightening lending standards. This column reviews the factors that have led to this virtual market shutdown and suggests structural changes, in the form of simpler and more transparent products trading at wider spreads, will be required to revive securitisation.

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