Lately, we are seeing an increased level of interest in Risk Participation Agreements (RPAs) by our clients. In simple terms, this is a relatively new instrument where banks are sharing their risk related to interest rate swaps on participated loans. Generally, a lead bank enters into a swap with one of its borrowers and looks to offset some of their credit risk by participating-out a portion of the risk of default on the interest rate swap by the borrower to a participating-in bank. In exchange, the participating-in bank receives a fee from the participating-out bank.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.