In the roll call of disappointing earnings and business writedowns from investment banks lies a grim common refrain – the once glittering and somewhat mysterious world of structured finance is in trouble. The financial losses and many cuts to staff at banks such as UBS, Citigroup and Merrill Lynch are centred in that new industry, which has led a recent boom in banking profits and a real-world debt bubble.

Structured finance is the esoteric preserve of highly paid people with maths PhDs who helped to create a new era in finance, designing a flood of new securities for investors who were hungry for higher returns. The money buying these securities was channelled through a complex, often opaque chain of inter-linked vehicles and funds.