Derivatives Are for Hedging, Not Bundling, Farkas Says
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Europe’s biggest banks say synthetic asset-backed securities can be as simple and transparent as the plain vanilla variety. Adam Farkas disagrees.
The European Banking Authority, which is working on a definition of high-quality securitization that would qualify for lower capital charges, “would not like to have resecuritizations and retranching and derivatives enhancing these structures,” said Farkas, executive director of the European Union’s bank regulator.