Unsecured debt has traditionally been a core part of the business of many european banks.
In the face of the eurozone crisis, and looming new regulation, those banks are shifting to secured debt (“covered bonds”) but also new financial instruments that sit somewhere between ‘covered’ and ‘uncovered’.
Like a living ecosystem, as one side evolves new rules to curb behaviour so the other evolves new ways to achieve its goals.
One example quoted is “a quasi-covered bond, backed by a revolving pool of collateral including stocks and exchange-traded funds.” That sounds very like the structure of the sub-prime mortgages that triggered the current crisis, and shows how hard it will likely be to legislate clearly.
http://www.ft.com/cms/s/0/8a9d0834-e91b-11e0-9817-00144feab49a.html
One example quote is “a quasi-covered bond, backed by a revolving pool of collateral including stocks and exchange-traded funds.” That sounds very like the sub-prime mortgages that kicked this crisis off, and will likely be very hard to legislate specifically against.