Report: Goldman Sachs, Morgan Stanley, and Bank of America scrutinize the leverage usage of SRT buyers

According to informed sources, U.S. banks such as Goldman Sachs, Morgan Stanley, and Bank of America are requiring investors to disclose whether they plan to take on additional debt to invest in Significant Risk Transfer (SRT) instruments, as regulators are currently reviewing whether these instruments pose a threat to financial stability. In recent months, investors have been asked this question at the start of the promotion process. Authorities are currently warning investment firms looking to leverage when purchasing SRTs. SRTs are transactions that help banks sell the risks associated with their loan portfolios. Since the debt supplier would be another bank, to some extent, credit risk is merely being transferred to another part of the financial system. (Bloomberg)