Italian Bankers Look to Insurance to Offset Balance-Sheet Risk

Banca Popolare di Bari SCpA, an ailing Italian lender, is in advanced negotiations with an international credit fund over insuring its loans against default, seeking an easier way to reduce risk on its balance sheet, Bloomberg News reported. The potential transaction, known as a synthetic securitization, involves buying insurance from Christofferson Robb & Co, thereby transferring the risk of the loans going sour to the fund in return for a fee, according to people familiar with the talks. Several other lenders are already considering similar deals, the people said, asking not to be named because they’re not authorized to speak publicly. Popolare di Bari will be the first such transaction in Italy since new European regulations came into effect this year that allow banks using standardized risk models to factor in more relief from synthetic securitizations. Read more

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