Abstract
By engaging in an active or ?structured? approach to portfolio management, banks involved in project finance lending can significantly improve their risk-adjusted returns to shareholders and enhance their ability to comply with Basel II and other regulatory requirements. In this approach, the portfolio manager works with the underwriting team not only to understand the credit quality of each new transaction, but also to determine how that transaction fits into an optimally diversified portfolio. Pricing of a new loan is sensitive to how it contributes to the risk of the entire portfolio. The portfolio manager actively buys and sells credit exposures where possible to create the most risk-efficient portfolio. The active sale of collateralized debt obligations (CDOs) frees up regulatory capital tied up with the underlying project finance loans. The bank transforms the credit risk function from a traditional buy-hold to an active originate-distribute-optimize approach.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
