According to many, the hidden leverage embedded in the securitization pipeline is what catalyzed the 2008 near-death experience of the financial markets.
All of this is well-known to most.
What however is certainly not known, because until a few days ago the concept did not technicall exist, is what emerged deep from the bowels of the FSB's 2013 "Global Shadow Banking report", and what is barely even defined anywhere in popular literature, which thus we have defined as the "unspoken, festering secret at the heart of shadow banking."
Presenting self-securitization.
What is "self-securitization"? Go ahead and Google it: there doesn't exist any technical definition of this heretofore unheard of phrase.
Rather the term, conceived by the FSB as a means of making the total size of the $71 trillion shadow banking sector somewhat more palatable, is defined as follows:
At this point alarm bells should be going off. And if they aren't, here is some more color.Self-securitisation (retained securitisation) is defined as those securitisation transactions done solely for the purpose of using the securities created as collateral with the central bank in order to obtain funding, with no intent to sell them to third-party investors. All of the securities issued by the Structured Finance Vehicle (SFV) for all tranches are owned by the originating bank and remain on its balance sheet.
Wait a minute: a company is "securitizing" assets.... which it then keeps, but only after it has "obtained funding with a central bank"? What?The numbers for OFIs presented in sections 2 to 4 of this report include all financial assets of Structured Finance Vehicles (SFVs), regardless of who holds the securitised products. However, in a number of jurisdictions, some of these products are returned back onto the balance sheet of the bank that originally provided the asset to be securitised. This so called self-securitisation, or retained securitisation, is defined as those securitisation transactions done solely for the purpose of using the securities created as collateral with the central bank in order to obtain funding, with no intent to sell them to third-party investors. All of the securities issued by the SFV for all tranches are owned by the originating bank and remain on the bank’s balance sheet, so that third-party investors do not own any of the securities issued by the SFV. These assets should not be included in the shadow banking figure, as prudential consolidation rules consider them as banks’ own assets and as such subject to consolidated supervision and capital requirements.
... some of the assets that are currently ‘self-securitised’ by banks may at some point be sold to third parties when financial conditions improve.
Judging by the countries whose shadow bank institutions are the most aggressive participants in "self-securitization", it gets clearer just what is going on here:

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