As a result, bank sponsors of ABCP conduits and certain other securitizations must now hold levels of regulatory capital commensurate with the exposure arising from the implicit support they provide. Collateralized borrowing arrangements and financial stability Turning now to financial stability concerns raised by short-term wholesale funding more generally, I want to focus on collateralized borrowing arrangements.
Flipping through a book of cartoons by that great economist, RK Laxman, I found one that indicated the solution for every ill in 1997 when the cartoon was published, as now, is for the RBI to cut interest rates by a hundred basis points. Arguments change, but clever solutions do not.