the mezzanine product group and the financial industry

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1、5TheMezzanineProductGroupandtheFinancialIndustrySofarwehavebeenlookingatmezzanineapplicationsincorporationswhereourconcernwasrelatedtothedynamicsoftheproduct,thereturntargetandtheintrinsicriskembodiedinthelevelofsubordinationofthemezzanineproductand/ortherisknatureofthetransactionbeingfinanc

2、ed,whetherthatwasanacquisition,recapitalization,internationalizationorotherwise.Ourunderstandingofriskandcorporategovernancedidthetrick.Thereare,however,industrieswheretheregulatordoesn’tleaveitcompletelyuptotheshare-holdersormanagementteamtodecidehowtheactivitiesofthefirmneedtobefinanced.Th

3、isoftenhappensbecausetheregulatorconsidersthatthepublicdeservesprotectionwhenengag-ingwiththesefirmsandtheclaimstheypotentiallyhaveagainstthefirms(asthesefirmshavebuiltupaliabilitytowardsthatpublic).Manytypesoflegislationtry(andsomemanagetoacertaindegree)toprotecttheaudienceagainstpotentiali

4、ssueswhichmightariseatthesefirms.Wearetalkinghereaboutthefinancialsector,andtoalargedegreeaswellaboutthein-surancesector.Sincetheyeitherraiserawmaterial(deposits)fromthepublicorinsurethemagainstcertainrisksandagreetoprovideapaymentincasethatriskmaterializes,theregula-torthoughtitwaswisetoreg

5、ulatehowthestructureofthebalancesheetofthoseinstitutionsshouldlookgiventhetypeofrisktheyareexposedto,withaviewtoprotectingthepublicintheirdealingswiththeseinstitutions.Itisbeyondthescopeofthisbooktoprovideafulloverviewofalltheinitiativestheregula-torshavetakeninthisrespect.Itisalsooutsideoft

6、hisbooktodrilldeepintotheexperiencesandpolicyresponsesthe2008–2009financialcrisishastriggered,andhowtheunderstandingofwhethertherulesinplaceweresolidenoughtoprotectagainstcertaintypesofsystemicmarketriskshaschanged.Finally,itisalsooutsidethescopeofthisbooktojudgeorevaluatethenewruleswhichhav

7、ebeenputinplaceandtowhatextenttheywillprovetobeamoresolidframeworkagainstfuturerisks.Besidesthemanytechnicaldiscussions,itisclearthatregulatorsareoftenbehindthecurveinsolvingissuesinlegislation,andbringingtheminlinewithreality.They,atleast,haveabad