Second, the crisis laid bare important structural deficiencies, such as the woefully inadequate disclosure on securitized products. Transparency should be improved so that risk can be identified more effectively and priced more efficiently. For example, the Bank of Canada used its collateral policy to improve the disclosure of bank-sponsored ABCP, creating a standard that should become commonplace.
More generally, we advocate publication of models and data underlying securities to move securitization from "black box" to "open source." There are also a host of initiatives for underwriters to have skin in the game (keep similar products or first loss). The Bank is working with government and industry players to explore the effectiveness of these and other alternatives.