European CRE CDOs set for debut

Collateralised debt obligations (CDOs) backed by commercial real estate (CRE) loans are expected to emerge in Europe late this year or early next. Once Basel II guidelines are adopted by banks from January 1, 2007, these lower-rated real estate loans will incur a higher capital charge, which is why lenders are looking at ways of exiting this risk. CRE CDOs could be one option.

"Banks could hold on to their subordinated positions or sell on to asset managers," says Andrew Currie, senior

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