BofA Eyeing SRT Deal Pegged to $1 Billion of Corporate Loans

Bank of America Corp. is considering a structured financial transaction that would offload some of the risk on a $1 billion portfolio of corporate loans, according to people familiar with the matter.

Such deals — known as significant-risk transfers and frequently structured as credit-linked notes — have become an increasingly popular way for banks to reduce the amount of capital they are required to set aside against their loans. The buyers receive higher yields in return for agreeing to take a portion of any losses on the loans, effectively insuring some of the portfolio against default.

The potential transaction by ...