In the U.S., a special form of special purpose entity governed by law (FIN 46). In more detail, it is – a legally autonomous economic entity whose equity provider – is not considered the main risk carrier or – cannot exercise a controlling influence under the articles of association despite holding a majority of voting rights. – Under GAAP, banks are not required to hold equity or reserves for these entities. They are also not required to disclose what assets they sell to their VIEs, nor what prices were charged for them, nor whether their value has declined in the meantime. – In the wake of the subprime crisis, this came under criticism; the consolidation of VIEs was also very laxly regulated in IFRS through SIC 12 “Consolidation – Special Purpose Entities.” – Investors who had bought securities issued by VIEs – Citigroup reported just over $35 billion at the end of 2007, Swiss UBS $20.1 billion – were unable to determine their actual value after the markets for securitized securities collapsed in the subprime crisis. – See Absent Capitalism, Sovereign Wealth Fund, Special Purpose Vehicle.
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