FSB warns of ‘circles of risks’ in bank risk transfer deals
Credit lines, portfolio financing and NAV facilities for private credit funds could rebound on banks
Banks’ willingness to provide financing to private credit funds is undermining the integrity of synthetic risk transfers (SRTs), according to the Financial Stability Board.
SRTs allow banks to transfer the credit risk of a pool of assets – typically corporate loans, but also consumer and auto loans – to external investors via financial guarantees or credit-linked notes (CLNs). Such instruments
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