Part III Investment Banking, 18 Securitization and Repackaging
- Basel 3 — Liquidity — Credit default swap (CDS) — UK Financial Services Authority (FSA)
18.01 Given that the Basel Accord is intended to reflect credit risk, it might have been expected that the rationale for a separate treatment of securitization exposures would have disappeared, and that exposures to securitization vehicles would be evaluated in exactly the same way as exposures to other types of vehicles, based on credit characteristics. In fact, exactly the opposite is the case. 18.02 The reason for this lies in the difference between ‘top-down’ and ‘bottom-up’ portfolio valuations. Top-down valuations take correlation effects into...