What is a Risk Participation Loan?

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6th Dec 2009 by Amelia Timbers

A risk participation loan is when numerous funding sources come together to pool capitol for one large loan and they participate in various credit or debt swaps among themselves to manage the risk of the project the capital is financing. For example, Bank A may take on a project it has neither the capital or risk tolerance to manage alone. It will make deals with other banks, now participators, who may take some of the debt off the books of Bank A. Thus many banks, or countries, can combine capital power for large projects, and all participants see a reward if the project is successful. Bank A would be known as the 'lead bank' and would still ultimately be responsible for the capital at risk.

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4th Dec 2009 In Finance 1 Answers | 1339 Views

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