Risk conference speakers predict more gloom for CDO buyers

“Most CDO structures done in the last three or four years will be tested in some way, either by the rating agencies, banks’ own models or in terms of the underlying rationale of the deals,” predicted David Henriques, head of Royal Bank of Scotland’s global risk financing group. Henriques voiced his concern over the development of different standards for restructuring of CDOs in the US and European markets.

Gerwinn Scharmann, head of portfolio finance at Bankgesellschaft Berlin, went even further in his criticism of the CDO market. “People don’t know how to price transactions,” he said. All too often, Scharmann added, that confusion extends to the investment banks trying to sell the investments, as well as the buyers.