Risk Participation means that CEXIM, as a risk participant, participates in partial or all the obligor’s credit risk undertaken by another bank (the grantor) under international settlement and trade finance.
According to whether CEXIM provides financing, risk participation includes:
1. Funded risk participation, in which CEXIM funds the participation amount;
2. Unfunded risk participation, in which CEXIM does not provide funding, but CEXIM shall make payment for its percentage of the amount in case the obligor fails to pay at maturity.
Our Service: Risk Participation is suitable for forfaiting; confirmation/negotiation/ discounting of a documentary credit; refinancing and reimbursing; draft, promissory note and guarantee; T/T remittance, D/A collection and etc.
Under risk participation, instead of accepting the assignment of creditor’s rights in a legal sense, participants only share the risk according to the agreed percentages and terms. Therefore, the grantor still retains the creditor’s rights and participants will not claim these rights to the obligor directly. Risk participation may not be disclosed to the obligor (silent risk participation).
Risk participation enables banks to expand the obligor’s credit facility;
Banks are able to reduce risk-weighted assets, improve capital adequacy ratio and satisfy relevant regulatory requirements;
Risk participation relieves the liquidity squeeze of banks;
Silent risk participation enables banks to enhance its level of risk taking, maintain its good relationship with obligors, and obtain a market-wide reputation.
Normally, the participant and the grantor should sign a master agreement of risk participation, but it is also possible to sign an agreement for a single deal, as the case may be;
CEXIM can provide full service and customized solutions in risk participation.