Lessons Learned from the Great Financial Crisis

Lessons Learned from the Great Financial Crisis

Securitisation

One of the most important lessons of the 2007-2009 crisis was that defaults and losses associated with securitisation positions have varied substantially across different types of securitisations and regions. The crisis has also shown that the poor performance of certain products, irrespective of the pre-crisis rating level, was associated with recurring factors, including:

• Misalignment of interest between originators and investors resulting in loose Underwriting Standards on the underlying exposures
• Excessive Leverage
• Maturity Transformation and
• Complex structures

Complex transactions have been assessed by external rating agencies using erroneous modelling assumptions and have been placed with investors without adequate transparency standards