Analysis-Fed shines light on path to US bank capital relief trades

A clarification of capital rules by the Federal Reserve may encourage U.S. banks to transfer more of the risk in their loan portfolios to investors, potentially letting them free up capital. The Federal Reserve on Thursday clarified rules around capital treatment of a type of structured debt which involves the sale of credit-linked notes that carry the risk of losses on U.S. bank loan portfolios to investors. In these debt trades, U.S. banks issue credit-linked notes tied to the performance of a collection of loans or other financial exposures, and sell those to investors, letting them lower their risk-weighted assets, according to the Fed's Q&A.