World on the EDGE: Fears of global financial crisis as ‘appetite for assets is FEROCIOUS’

Wednesday, August 2, 2017
By Paul Martin

THE world is at risk of another catastrophic financial crisis as bankers are again snapping up risky loans to underpin complicated investments which are then widely sold.

Wed, Aug 2, 2017

Big pension funds and companies are exposed to the investments.

Even though the underlying loans are effectively junk status, credit rating agencies say the investments are triple A.

Deals in so-called collateralised loan obligations are set to be worth £56bn ($75bn), according to experts spoken to by the Financial Times.

Regulation in the US was supposed to put an end to these risky deals.

But bankers are finding ways to continue taking on the risks.

As in the last financial crisis, it’s thought that top ratings agencies have problems in the programmes that issue top ratings.

Some experts believe another crash isn’t possible.

According to the Financial Times, Ashish Shah, a managing director of Madison Capital Funding, said there is no need to worry about loan defaults.

He said: “The appetite for assets is ferocious.”

It comes as big companies look investments that are safe and offer high returns.

But it’s feared risks are building that could lead to another financial crisis, such as that seen in 2007.

During this time, complicated investment products were linked to the US sub-prime housing market.

The subsequent fallout could mean a fresh round of financial devastation at a time when the economy has barely recovered from the crash 10 years ago.

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