Cracks are starting to appear in the Equator Principles. While banks may not lend money for non-compliant projects, they are still free to invest or to lend to export credit agencies that do the financing. Geraldine Lambe explores the new reputational risks this throws up.
The asset-backed commercial paper (ABCP) market, which started modestly as a way for banks to move assets off their balance sheet, using special purpose vehicles known as conduits, is today among the most innovative and complex financial sectors, often supporting entirely synthetic transactions.But its very success is arousing concern among some close observers. The market's role in shifting risk, often to exploit anomalies in the regulatory treatment of the banks' capital, looks distinctly uncertain when the rules change in three years time under current proposals.