Overall, the rapid development in the market for credit risk transfer played a major role altering banks’ functions. Structurally, securitization allowed banks to turn traditionally illiquid claims (overwhelmingly in the form of bank loans) into marketable securities. The development of securitization has therefore allowed banks to off-load part of their credit exposure to other investors thereby lowering regulatory pressures on capital requirements allowing them to raise new funds. The massive development of the private securitization market experienced in recent years coincided with a period of low risk aversion and scant defaults. This resulted in a number of shortcomings.
