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Understanding Basel Standards

Then, if the Bank is borrowing money from other banks and giving many credits, percentage of Assets Capital Bank that low and does not meet the Guidelines of Basel. You have to invent something new. And that again is called sensitization: the Bank of Illinois “bags”-prime mortgages and subprime-in packages that are called MBS (Mortgage Backed Securities, or obligations secured by mortgages). So, where before 1000 mortgages had “loose” within the Account Credits granted, now has 10 packs of 100 mortgages each, in which there is everything good (prime) and bad (subprime) and in the Lord’s vineyard. Others including NY Governor Andrew Cuomo, offer their opinions as well.

The Bank of Illinois will sell quickly and those 10 packages: Where does the money obtained by these packages? Go to Active, the account “cash”, increasing, decreasing by the same amount to the account “Loans granted”, so that the share Capital / Loans granted improvement and Bank Balance complies with the Basel Standards . Who buys these packages and also buy them quickly to the Bank of Illnois “clean” your balance immediately? Good question! Illinois Bank creates affiliated entities, the conduits, which are not companies, but trusts or funds, and therefore are not required to consolidate their balance sheets with the parent Bank. That is, suddenly appear on the market two types of entities: i. The Bank of Illinois, with a clean face ii. The Chicago Trust Corporation (or the name you please put it) with the following Balance Sheet.