“So why didn't ABCP investors -- at least the large institutional investors -- have a better grasp of the uncertain nature of market disruption triggers as defined under Canadian-style liquidity? Probably because the contracts were not available for review to investors wishing to purchase ABCP -- yet another example of the lack of transparency surrounding the distribution and sale of this product.” FinanceDisclosureLiquidity Book:Back from the Brink: Lessons from the Canadian Asset-Backed Commercial Paper Crisis Source: Back from the Brink: Lessons from the Canadian Asset-Backed Commercial Paper Crisis
“[T]he ABCP market was built on a fatal flaw: a significant mismatch between the duration of the underlying assets (long-term) and the duration of the paper itself (short-term). While this structure is not unusual -- banks use it all the time -- the crucial difference is that banks have a strong liquidity provider in the event of a problem: the Bank of Canada. The trusts, however, were left in limbo.” FinanceLiquidity Book:Back from the Brink: Lessons from the Canadian Asset-Backed Commercial Paper Crisis Source: Back from the Brink: Lessons from the Canadian Asset-Backed Commercial Paper Crisis