Minor Injuries

Oct 16, 2007 (LBO) – As global markets are going through a painful hangover from a US housing bubble, the head of a ‘big four’ accounting firm says Asia will remain largely unaffected. Jim Turley: I don’t think there is going to be a lasting effect of this on compliance cost because institutions that are heavy investors in these types of securities are certainly scrubbing in great depth their portfolios in the 3rd and 4th quarter, and so you will see an uptake in compliance cost on a quarterly basis but not anything substantial either to the institution in those quarters or permanent in terms of billing into compliance cost model.

LBR Newsdesk Ernst & Yong Global Chairman and CEO James S. Turley however says, even firms here are “scrubbing” their investment portfolios for under-priced risk.

At the heart of the problem is a procedure called asset securitization which allows an originator of a housing mortgage to take the loan out of its own balance sheet and re-sell it to a third party investor via a specially created asset backed security.

Though rating agencies have come under fire for not recognizing the real risks of such securities, Turley says accountants are