The securitised products sold in Australia were reasonably transparent. The only problem is that very few people understood either the risk and a lack of proper risk diversification between products.

All the sellers and buyers knew that default rates over a certain level would trigger losses of interest then capital. Truely they can't say they didn't know this and you don't need to be sophisticated punter to understand what a default rate is either. They just didn't believe the risk event could happen in their lifetime.

An issue for Aussie banks is that their representatives issued protection guarantees to investors in higher ranked products. I wonder if the contingent liabilities are now being brought to account?

To learn more about the Aussie scene see http://www.imf.com.au