June 2009 Special Edition

S&R Perspectives cover

Read more about the risk-based capital treatment for direct credit substitutes in this article.

In This Issue

Risk-Based Capital for Direct Credit Substitutes

Financial institutions that invested in certain mortgage-backed and asset-backed securities, or MBS and ABS, have seen another aspect of the financial crisis emerge – rapidly increasing risk-based capital requirements. Given the pre-crisis mortgage landscape filled with innovative mortgage products, historically low delinquency and loss levels, and a relatively flat yield curve, the issuance of private-label (or non-agency) mortgage-backed debt experienced significant growth.

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