BizTerm Definition
Transactions with recourse
Full Definition

An arrangement whereby a bank sells a loan or other asset to a third party, but retains an obligation to assume the credit risk if the borrower defaults or the value of the asset otherwise deteriorates. Typically, these involve the sale of assets previously owned by the banks ("asset sales with recourse"). They may also take the form of "put options", where the holder of the asset is entitled to "put" the asset back to the bank if, for example, the credit quality deteriorates.


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