This paragraph has an idea I hadn’t heard before

What sweet words those are.  Here is the paragraph, from The Economist:

Matt King, an analyst at Citigroup, believes that the surge in
securitisation during the bubble can partly be explained by a massive
mismatch between the regulatory regimes of American and European banks.
Those American banks whose regulator imposed a leverage ratio had an
incentive to move assets off their balance-sheets. European banks which
operated only under a risk-weighted capital regime were able to buy
those very same assets because they attracted a low capital charge.
With risk weightings on the rise, and leverage ratios all the rage, the
capacity of European banks to purchase these assets is shrinking.

The broader question is to what extent the securitization model will make a comeback anytime soon.

Addendum: Arnold Kling comments.


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