Which part focuses on credit risk retention?

The correct answer focuses on credit risk retention as specified in Part 373 of the regulations. This part implements requirements for financial institutions to ensure that they retain a certain amount of credit risk when they sell or securitize loans. The rationale behind this regulation is to align the interests of loan originators and investors, thereby promoting sound underwriting practices and reducing the likelihood of excessive risk-taking.

By mandating that institutions retain a portion of the credit risk, Part 373 encourages them to maintain a vested interest in the performance of the loans they originate, which is essential for the stability of the financial system. This retention requirement is a critical component of safeguarding against future financial crises by discouraging behaviors that could lead to risky lending practices.

Other parts, such as 371, 380, and 391, may address different aspects of banking regulations, but they do not specifically pertain to credit risk retention, making them less relevant in this context.