It was precisely such new concentrations of risk that led to the distress in the past few months threatening the existence of a number of financial institutions which were not themselves active players in the area of real estate lending. Overly optimistic assessment of structured securities The previous ten months have shown dramatically the limited value of even professional ratings.
In this regard, one of the other IOSCO recommendations is likely to be the mandatory requirement of gates as a redemption tool, which to our thinking would be sensible. Where support from a sponsor is implicit it should be made explicit, though it is worth acknowledging that this may have implications for the capital requirements of the sponsor.