Financial markets now offer many new products. Securitization is playing a much more significant role in financial markets. It is important not to lose sight of the advantages of diversification of risks and access to capital by companies. However, we must draw important lessons from this experience.
Regarding the credit rating agencies, a significant number of complex products did not yield the expected results for several reasons. When the agencies reviewed high risk mortgage loans and mortgages in general, they thought that diversification would minimize risks, but they did not anticipate that housing prices in the United States would fall to the extent that they did. As a result, diversification did not work as well as expected.
If you have a rating that's triple-A for a traditional single-name corporate, it has turned out that the behaviour of a triple-A complex product in situations of a lot of stress has tended to be different from a single-name corporate A. One of the recommendations of the Financial Stability Forum along with the IOSCO body is that rating agencies differentiate the ratings between structured and traditional products to provide investors with more information about the fact that their behaviour may be different even if their probabilities of default are the same.