Under fire

Broadsides aimed at the synthetic securitisation market, and by implication, the credit derivatives market by the chairman of the FSA have left bankers fuming. But while the asides from the UK regulator may have shown a lack of understanding of the big picture, the issues surrounding the rise of insurance investment banking should not be taken lightly. Mark Pelham reports.

Synthetic securitisations, and by implication the credit derivatives market that underpins them, have recently come under scrutiny and in some cases heavy criticism from regulators, particularly over their use in transferring credit risk from the banking to the insurance sectors. Although there is some basis for concern, with insurance companies’ results suffering because of their synthetic holdings, bankers in the credit derivatives market say that is not the whole story. In fact, they believe