Bank of Ireland Insured Against US Loan Losses
The bank transferred credit risk to investors as it prepares to wind down its US leveraged acquisition finance unit.
Updated on Oct. 9, 2026 in Corporate Finance
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Bank of Ireland utilized significant risk transfer transactions to mitigate losses stemming from its US leveraged finance loan portfolio. The move follows a period of financial strain that led the bank to decide to wind down its US unit over three years.
Why it matters
The bank aimed to free up capital that would otherwise be held against loan portfolios following a spike in US interest rates. This strategy allows the institution to shift potential credit risk to specialist investors.
The bank recorded a €127 million loan loss charge in 2024 and €110 million in impairment losses in 2025. Significant risk transfer bonds used in the process paid annual coupons exceeding 13 percent.
The players
Bank of Ireland
This is a commercial bank based in Ireland that has sought to reduce its exposure to US leveraged acquisition finance.
ArrowMark Financial
This investment management firm holds bonds linked to the bank's 2021 risk transfer transaction.
First Trust Alternative Opportunities Fund
This investment fund holds bonds associated with the bank's 2024 risk transfer transaction.
The details
Bank of Ireland entered into risk transfer agreements in December 2021 and May 2024, involving specialist investors who assumed credit risk for potential loan losses. While ArrowMark Financial values the 2021 bonds at 34 US cents, First Trust Alternative Opportunities Fund values the 2024 bonds at 91 cents.
Timeline
December 2021: Bank of Ireland entered its first significant risk transfer transaction.
May 2024: The bank entered a second significant risk transfer transaction.
February 2026: The bank decided to wind down its US finance unit.
June 2026: The portfolio value fell to €1.2 billion.
Market Dynamics
The bank's move mirrors a broader trend where institutions use synthetic risk transfers to offload credit risk in response to the post-2022 global spike in interest rates. This strategy highlights how banks manage balance sheets amid volatility in the US leveraged finance sector.
Investors holding these specific risk transfer bonds face valuations ranging from 34 to 91 cents on the dollar, reflecting the underlying credit risk. These instruments demonstrate how institutional debt products can offer high coupons while exposing holders to significant volatility.
The takeaway
Banks are increasingly utilizing significant risk transfer agreements to insulate their balance sheets against defaults in the leveraged loan market. This mechanism provides a way for institutions to divest from high-risk sectors without immediate liquidation of the entire portfolio.
Further reading
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