The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

ABCP conduits: Money market mayhem

The disappearance of both CP investors and ABS buyers in August had grave consequences for those vehicles that rely on both.

Everyone expected a lot of US sub-prime mortgages to go sour and everyone knew that leverage in the LBO market was getting ridiculously high. But the liquidity crisis that hit the ABCP market in August was something that almost no one saw coming – and was greeted with panic and bafflement in equal measure. "We sat down early in the month and said ‘How far can this thing spread?’" reveals an ABS veteran. "We knew that the short-term money markets would be impacted, but it seemed that the entire ABCP investor base getting up and walking on 30-day paper was something that just could never happen."

So why did it? There must be a pretty good reason for the markets to get to the stage that banks will not even lend overnight to each other. Many see the problems in ABCP (and structured investment vehicles, SIVs) as the result of a chronic dearth of transparency. "When CP investors were trying to see what was in the conduits the information was so vague that they just panicked," says an observer. "If you are simply told that the exposure to CDOs is X – but you are not able to find out what type of CDOs these are or what is backing them – then you will assume the worst and run."

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?