- Instrument
- Funded or unfunded participation
- Raised by
- Originating bank
- Priced as
- Share of margin or fee
- Purpose
- Limit relief and risk spreading
Keeping the client without keeping all the risk
A bank’s appetite is bounded by limits: on a country, on an obligor bank, on a single name. Risk participation is how a bank writes a deal larger than its own appetite — it keeps the client relationship and sells down part of the exposure to participating banks.
In an unfunded participation the participant pays only if the underlying obligor fails; in a funded one, cash goes in up front. Either way the participant is buying short-dated, self-liquidating trade exposure, usually to a bank, at a price it can compare against its own book.
Financial institutions can leverage the platform for originating FI trade deals like risk participation deals from banks globally — both sides of the trade, on one system, without a broker in the middle.
The shape of the flow
The exposure is split, the relationship is not. The originating bank keeps the client and sells down part of the risk.
How it works on TradeOrigin
The originating bank posts the exposure; participating banks bid for a share.
Post the exposure
The underlying instrument, obligor, country, tenor, amount and the share offered — funded or unfunded.
Banks bid for a share
Participating banks indicate the amount they will take and the price they need, sealed from other bidders.
Allocate and confirm
Accept the bids that fill the sell-down and confirm allocations; the participation terms are recorded on the deal.
Run to maturity
Fees, claims and maturity are tracked against the same record, so every participant sees the same status.
Who it is for
Beyond their own limit
You do not want to turn down a client’s transaction because a single-name limit is full.
Buying trade assets
Short-dated, self-liquidating bank exposure is attractive paper — the hard part is seeing enough of it to choose from.
Managing concentration
Selling down a share is often faster than raising a limit, and it keeps the relationship intact.
What you get
Write the deal anyway
Limit pressure stops being a reason to decline a client’s transaction.
Genuine price discovery
Several banks bidding for the same participation shows what the risk is actually worth today.
A wider counterparty set
Reach participants beyond the handful of banks you usually call.
One shared record
Every participant works from the same terms, the same documents and the same audit trail.
What the bank will ask for
Uploaded once, against the deal, and visible only to the counterparties on it.
Questions
Funded or unfunded?
Both. The request states which is offered, and the bids price accordingly — they are very different risks and very different prices.
Is this a master agreement replacement?
No. Participation is documented between the banks as it always is; the platform is where the deal is found, priced, allocated and tracked.
Can a participation be offered on a deal originated elsewhere?
Yes, provided the originating bank can share the terms it needs to share to get the risk priced.
Related
Counter Guarantee
A bank’s guarantee to a second bank, so the second bank can issue locally where the beneficiary needs it.
ProductLC Confirmation
Add a second bank’s undertaking to a letter of credit, priced by banks competing for the confirmation.
ProductForfaiting
Sell medium-term export receivables without recourse and take the risk off your balance sheet entirely.