Credit Risk Transfer Discussions
HSBC Holdings Plc is holding preliminary discussions with insurers to offload credit risk on a series of project finance deals tied to data center loans. The deliberations follow an earlier assessment of insurer appetite for an exclusive data center portfolio and are currently at an early stage with no deals guaranteed. Chief Financial Officer Pam Kaur noted during an earnings call that data center lending is not a significant growth area for the bank in the US or Asia.
Market Context and Alternative Measures
The lender pays credit risk insurance premiums to cover an agreed percentage of losses on specific loans, freeing up regulatory capital. Similar moves are underway across the banking sector, with Barclays Plc seeking insurance on more than $10 billion of AI-infrastructure credit and Deutsche Bank AG working on a significant risk transfer tied to about $2 billion in project finance debt. Yields on AI-related bonds and loans are rising as credit markets face difficulties digesting the surge in exposure.