Net risk transfers

In banking, the ultimate responsibility for repaying a financial claim should the original borrower default. There are in general six general categories of risk transfers: (i) guarantees (legally binding commitments by a third party to repay a debt if the direct obligor fails to do so); (ii) insurance policies; (iii) claims on a branch when the parent is based in another country; (iv) collateralised claims; (v) risk participations (eg, loans and acceptances, where the accepting bank has sold a risk participation, are considered to be guaranteed by the purchaser of the participation); and (vi) credit derivatives that have been used as cover for counterparty risk in the banking book.