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1 - The transparency issues:

• Canadian investors kept buying the commercial paper without any concerns, caring only about the high returns received. Therefore, on a “don’t ask, don’t tell” basis, banks did not feel obligated to disclose further details about the risks and nature of the ABCP or the assets underlying it
• Considering that the banks earn a transaction fee from selling securities, it may have been more profitable for them to hide the risks from investors and increase sales
• The bank’s failure to advise clients about the nature and risks of these investments is a result of the moral hazard problem; this raises questions about the transparency of these transactions and conflict of interest between the bank as both a profit-seeker and dealer of ABCP
• This lack of transparency eventually played a large part in causing a credit crisis for the ABCP trusts
• Without explicitly knowing, Canadian investors had been exposed to the subprime mortgage crisis in the U...

1 - The transparency issues:

• Canadian investors kept buying the commercial paper without any concerns, caring only about the high returns received. Therefore, on a “don’t ask, don’t tell” basis, banks did not feel obligated to disclose further details about the risks and nature of the ABCP or the assets underlying it
• Considering that the banks earn a transaction fee from selling securities, it may have been more profitable for them to hide the risks from investors and increase sales
• The bank’s failure to advise clients about the nature and risks of these investments is a result of the moral hazard problem; this raises questions about the transparency of these transactions and conflict of interest between the bank as both a profit-seeker and dealer of ABCP
• This lack of transparency eventually played a large part in causing a credit crisis for the ABCP trusts
• Without explicitly knowing, Canadian investors had been exposed to the subprime mortgage crisis in the U...

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