Consolidation threatens securitization
Seasoned international bankers believe that changes are now necessary in the area of off-balance-sheet financing - an activity that has exploded out of all recognition in the past decade or two. "Deregulation started 20 years ago and has gone way too far," says Minos Zombanakis, a well-known former Euromarket banker who is now an international financial consultant. "To allow off-balance-sheet financing of such enormous amounts is ridiculous. Banks use off-balance-sheet structures all the time to avoid capital adequacy." He adds: "The whole idea of off balance sheet is wrong. Consolidation is a necessity. You can use any kinds of structures during the year that you want, for administrative purposes or whatever, but when it comes to reporting, you must consolidate. That is the only way to protect the investor."
The much-criticised ratings agencies may be able to contribute in this regard. "Off-balance-sheet financing is a very legitimate area of concern," says Christopher Mahoney, senior managing director at Moody's.