Credit Risk Transfer

Techniques for transferring credit risk, such as financial guarantees and credit insurance, have been a long-standing feature of financial markets. In the past few years, however, the range of credit risk transfer (CRT) instruments and the circumstances in which they are used have widened considerably. A number of factors have contributed to this growth, including: greater focus by banks and other financial institutions on risk management; a more rigorous approach to risk/return judgments by lenders and investors and an increasing tendency on the part of banks to look at their credit risk exposures on a portfolio-wide basis; efforts by market intermediaries to generate fee income; a generally low interest rate environment, which has encouraged firms to search for yield pickup through broadening the range of instruments they are prepared to hold; and arbitrage opportunities arising from different regulatory capital requirements applied to different kinds of financial firm.

(Texto en inglés)