Risky business: Is securities restructuring the answer to problem portfolios?
Restructurers roll boulders uphill
Synthetic restructuring a question of price
Restructuring: How not to do it
WHERE THERE’S MUCK there’s brass goes the old English saying. There is plenty of mess to be cleaned up in the financial markets right now. And various intermediaries are eyeing the substantial potential profits to be had from helping to clean it all up. But this activity is more important than the opportunity it gives these players to make a fast buck. Attending to financial institutions’ economic accounting issues, lack of capital and parlous liquidity positions as a result of their deteriorating credit portfolios is one of the most urgent challenges the markets and wider economy face. As a result balance sheets are being restructured using a range of techniques, but most notably the financial markets’ bogeyman – securitization.
A close examination of the methods being used to solve banks’ problems shows that structured finance is not dead. However, the rationale for its use has been turned on its head. Instead of trying to extract as much yield as possible from portfolios of credit risk, the approach is now highly defensive.