like a relaunch of securitization in order to support the provision of credit to the real economy
and the US Federal Reserve as well ascentral banks in Europe have had to step in to provide liquidity to thesecuritization markets. These words and actions point to a recognitionof the role played by the alternative banking sector in intermediatingglobal capital flows from savers to borrowers. This financialintermediation function erstwhile performed by the sector makes itsstigmatization tantamount to throwing out the alternative bankingbaby with the bathwater. The challenge here as in all other forms of banking should be to devise ways of channelling capital flows such thatfinancial stability and economic growth are re-established andstrengthened.An analysis of the collapse of SIVs and other structured credit vehiclesreveals multiple lessons that can be learned, whatever acronyms areadopted for alternative banks in the future. This should help preventsuch collapses and the resulting instability to the financial system. Thischapter is dedicated to exploring the lessons that can be learned whilehighlighting institutions that would do well to demonstrate that thelessons have been heeded.
Regulatory supervision of bank-like structures
Banks, insurance companies, pension funds and hedge funds were theprimary sponsors and managers of SIVs. It is the role of regulatorsto ensure that such sponsoring institutions adhere to minimum capitaladequacy standards in accordance with the risks they assume. Whereregulators allow institutions to hold assets off-balance-sheet that
Improving Financial Regulation, Report of the Financial Stability Board of G20 Leaders
,September 2009, pp. 11-12.