From Mr Michael J. Wade.

Sir, Tim Hailes (Letters, August 24) is of course right to state that complex financial engineering is inherently neither “good” nor “bad”; however it is worth reminding ourselves that such instruments – reinsurance spirals at Lloyd’s in the 1980s and collateralised debt obligation structures by 2007 – contained two lethal elements. Due to the lack of transparency the markets were unable to make a proper assessment of risk and pricing and, worse, neither could the systemic risk be measured.

So while embracing entrepreneurial financial structuring, we also need to invent a regulatory framework that can enable a much greater transparency than has been the case to date in the financial markets. Perhaps that is where the designers of these products should consider how this might be achieved?

Michael J. Wade,

London SW1, UK

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