The return of the bank balance sheet CDO
Despite almost drying up in 2004, supply of bank balance sheet CDOs has started to pick up again, with Basel II providing the main impetus
Although balance sheet CDOs issued by major banks provided the impetus for the launch of the European CDO market in the mid-1990s, by 2004 new supply from this source had dried up almost entirely.
A prominent recent trend in the CDO market has been a resurgence of supply in this sector of the market. Basel II capital adequacy rules were an important stimulant to issuance in 2006, with loans to SMEs kept on balance sheets requiring a relatively high risk weighting compared with mortgages and loans
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