Outsourced risks suddenly reappear in unexpected places. – This was very clearly demonstrated in view of the subprime
In the summer of 2007, banks in the U.S.A. transferred receivables to special-purpose entities, which were then tranched by these entities, and these receivables were found en masse in the assets of European banks. Because it became impossible to service these credit-linked notes (CLNs) from the reference assets in the USA, a high level of write-offs was required at numerous institutions around the world. Losses had to be borne first by the banks and soon afterwards by taxpayers. This led to a global financial crisis. – See pent-up effects, credit default swap, credit linked notes, financial alchemy, clump risks, credit derivative, credit securitization, liquidity risk, air securities, mark-to-model approach, ninja loans, originate-to-distribute strategy, panic selling, reintermediation, retrocession, risk mitigation techniques, extended, risk transformation, banking, risk assumption principle, blowback effect, single master liquidity conduit, subprime crisis, total return swaps, underwriter, securitization structure, warehousing risk, lemon trading.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/