Risk Participation
Barron's Banking Dictionary:
Top
Risk Participation
Sale by a bank of its participation in a contingent obligation, for example, a bank's participation in a Banker's Acceptance or a Standby Letter of Credit. The originating bank remains liable to the beneficiary for the full amount of the transaction if the obligor fails to pay when payment is demanded. These are treated as off-balance sheet transactions in computing risk-weighted capital, and are not included in a bank's equity capital under the risk-based capital guidelines.
Related Videos:
Top
Risk Participation
Investopedia Financial Dictionary:
Top
Risk Participation
A type of off-balance-sheet transaction in which a bank sells its exposure to a contingent obligation, such as a banker's acceptance, to another financial institution. Risk participation allows banks to reduce their exposure to delinquencies, foreclosures, bankruptcies and company failures.
Investopedia Says:
Risk participation agreements are often used in international trade, but these agreements are risky because the participant has no contractual relationship with the borrower. On the upside, these transactions can help banks generate revenue streams and diversify their income sources.
Related Links:
This article defines some typical off-balance-sheet items and discusses when they are justified and when they are misleading. REWRITE - Off-Balance-Sheet Entities: The Good, The Bad And The Ugly
Learn about the components of the statement of financial position and how they relate to each other. Reading The Balance Sheet
Knowing what the company's financial statements mean will help you to anaylze your investments. Breaking Down The Balance Sheet
Asset performance shows how what a company owes and owns affects its investment quality. Testing Balance Sheet Strength
Break down the walls around researching financial instutions' financials. Analyzing A Bank's Financial Statements
Post a question - any question - to the WikiAnswers community:
Copyrights:
Barron's Banking Dictionary
Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.
Read more
