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Financial Times Lex Column - Is structured finance dead?

Is structured finance dead? The market is certainly on life support: issuance of collateralised debt obligations and their synthetic equivalents has fallen from a peak of more than $350bn worldwide in the first quarter of 2007, according to Creditflux, to virtually nothing.

Securitisation remains a useful tool to spread risk but, if market participants cannot identify who is at risk and the extent of the risk they are exposed to – or would like to pass on – it is no wonder the system has seized up. Restoring trust in the “originate and distribute” model needs a wholesale injection of transparency, enforced by regulation.

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