The 2007-08 global financial crisis has revealed a severe effect of financial crisis on the economy at the global scale, which highlights the importance of the banking sector. As part of the responses, the Basel Committee proposed the new Basel III Capital Accord on 1 June 2011 to promote financial stability.

Requirement: In the context of the 2007-2008 global financial crisis and Basel III capital regulation, answer the follow three sub-questions:

1. Define securitization. Describe the process of securitization with illustrative figures of how to create an asset-backed Security (ABS).

2. Describe how the sub-prime crisis unfolded and developed into the 2008 financial crisis.

3. Explain the rationale of banking regulation.