Risk weighting fiasco makes a farce of regulation

By Owen Sanderson
25 Mar 2014

The risk weights for securitization have been halved, again, in the latest version of Solvency II. Naturally the market is pleased to be further out of the regulatory dog house, but the way risk weights (and therefore careers, businesses and economies) can be slashed at the stroke of a pen ought to give pause for thought.

GlobalCapital supports the lower risk weights for the best quality securitizations, circulated in the latest private draft of Solvency II, the new capital regulations for insurers. Securitizations are still disadvantaged compared to (uncollateralised) corporate bonds, but are now at least investable for insurers.

The best tranches of the most ...

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