The Joint Forum, a group of senior financial sector supervisors from the Basel Committee on Banking Supervision, the International Organization of Securities Commissions, and the International Association of Insurance Supervisors (IAIS), has released the final version of its consultative paper titled Credit Risk Transfer–Developments from 2005 to 2007 (paper). The paper was developed in response to a request from the Financial Stability Forum in March 2007 to consider the extent to which the Joint Forum’s March 2005 paper titled Credit Risk Transfer. required updating due to the continued growth and rapid innovation in credit risk transfer (CRT) markets.

The report outlines the way in which CRT products have become more complex, and investors in such products have become more diverse and global, transferring credit risk out of the United States and into global markets. The report also describes how CRT products have contributed to current market turmoil. In addition, the report provides a series of recommendations for market participants and supervisors in relation to CRT products, covering, amongst other things, senior management review, credit analysis, stress testing and risk management.