3.1  Regulation  Securitisation – The securitisation market has played a critical role in the financial crisis. Prior to the crisis, a lack of transparency in this market aggravated wrong incentives in the originate-to-distribute business model. As credit risk was well hidden in highly structured products, it was easily transferred to other market participants.
This in turn increased the incentive to originate credit risk. Consequently, credit standards deteriorated, contributing to overheating phenomena such as those seen on the American housing and loan market. The fact that market participants often relied solely on credit ratings and that these ratings did not always capture the credit risk adequately aggravated the situation.