Such a process may lead to uncomfortable moments for regulators, but that is a small price to pay if it can help contain financial instability in the future. BIS Review 48/2010  5
Banks engage in regulatory capital arbitrage mainly through securitizations and credit derivatives. These vehicles offer improved opportunities for banks to manage their risks and liquidity. Securitizations allow banks to transfer the risk of an underlying loan pool to capital markets, retaining their role in the origination of loans, but transferring more of the ultimate funding to the capital markets.