Following the subprime crisis in the summer of 2007, which escalated into a global financial crisis in the fall of 2008, the regulatory authorities required originating banks to retain a certain percentage of the securitized securities issued in their own portfolios. This was intended to prevent originators from carelessly tranching and passing on risks from a pool of receivables. This is because such a requirement would encourage the originator to determine the credit quality of its securitization at the outset by means of a credit assessment and to monitor it continuously even after the securitization has been sold, instead of imposing these risks on the purchaser of the securitization instruments. – Of course, appropriate supervisory regulations should also determine precisely which tranche must remain with the originator. Also, an institution should be prohibited from selling its retention from an issue to risk investors. – See Absenzkapitalismus, High-speed Money, Moral Hazard, Subprime loans.- Cf. Deutsche Bundesbank Monthly Report of January 2009, p. 69 et seq. (rating for securitization positions), BaFin Annual Report 2008, p. 55 (supervisory retention requirements; disclosure requirements), BaFin Annual Report 2010, p. 124 et seq. (in the wake of the Capital Adequacy Directive, a retention ratio is mandatory).
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