Treasury - Sixth Report
Here you can browse the report together with the Proceedings of the Committee. The published report was ordered by the House of Commons to be printed 26 February 2008.
Contents
Terms of Reference
Summary
1 Introduction and overview
The origins of the current crisis
Conduct of our inquiry
Financial stability and why it matters
The international dimension
2 Changes in financial markets
The economic backdrop—the 'great moderation'
The 'search for yield'
Rise of alternative capital pools
Hedge funds
Private equity
Sovereign wealth funds
Off-shore financial centres
The growth of global markets in asset-backed securities
The shift from an 'originate and hold' to an 'originate and distribute' banking model
Credit rating agencies and the tranching process
The growing role of the agencies
Credit rating scores
The importance of a 'good' credit rating
Tranching
Who purchased asset-backed security tranches?
The sub-prime mortgage market in the USA
The growth of the sub-prime mortgage market in the USA
The financial stability and efficiency implications of the 'originate and distribute' business model
3 Events leading to the closure of the credit markets
Growth of problems in the sub-prime mortgage market
The spillover into the credit markets
The role of the credit ratings agencies
Warnings from public authorities about pricing of risk and potential impaired market liquidity
The closure of the credit markets
The closure of the money markets
Central bank intervention
4 Events since August 2007
Growing problems in the banking sector
Banking losses and valuation difficulties
International coordinated action by central banks
Real economy consequences of banking losses
The impact on private equity
5 International action
The importance of action at the international level
Global financial institutions and the role of the IMF
International work on credit rating agency reform
International work on prudential regulation of financial institutions in relation to their exposure to off-balance sheet vehicles
Accounting and valuation of structured products
6 Securitisation markets: product complexity, investors and the role of the credit rating agencies
Product complexity and investor understanding
Incentive structures and information loss under the 'originate and distribute' model
Investors and credit rating agencies
7 Credit rating agencies: methods and conduct
How credit rating agencies reach their conclusions
Conflicts of interest
Increasing competition within the ratings industry
Monoline insurers
8 Off-balance sheet vehicles and the future of the 'originate and distribute' banking model
The future of the 'originate to distribute' banking model
Regulating off-balance sheet vehicles
9 Heeding the warnings
Conclusions and recommendations
Formal Minutes
Reports from the Treasury Committee during the current Parliament
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