December 16, 2024 (NO COMMENTS)

Quietly, with little fanfare, a niche market for credit risk transfer is emerging. Banks and lawyers report growing interest in structures that enable derivatives dealers to offload unwanted counterparty credit risk to investors.

The trades are complex and highly bespoke. Transactions can take different forms – risk participation agreements, credit risk insurance, guarantees, variants of credit default swaps (CDS) – but the underlying risk transfer remains largely the same.

Banks are pitching the