collateralized debt obligations

verfasst von CRASH_GURU, 20.12.2005, 07:55

-->The FT: “The booming popularity in recent years of synthetic collateralized debt obligations - pools of credit instruments that are repackaged into slices with different risk profiles - has given some banks a problem. They have found a ready market among investors for the mezzanine, or moderate risk, tranches of synthetic CDOs, and so-called “leveraged super-senior” deals have also found buyers at the safest end. But the equity, or first-loss, risk at the lowest end of the credit spectrum has proved harder to shift, which has left some issuing banks with large unwanted trading positions…

A survey published last month by Fitch Ratings found that, at the end of 2004, banks globally were carrying $164bn of exposure to unrated synthetic CDO tranches, which represented 14 per cent of the entire CDO market.

These unrated tranches were most likely to have been equity pieces. Fitch surmised that the strictures of Basel II, new bank capital rules set to come into effect after 2006, would force banks to increase efforts to reduce these holdings.”

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• collateralized debt obligations - CRASH_GURU, 20.12.2005, 07:55