The Credit Risk Transfer and Negative Impact on the Stability of Financial System

Credit risk transfer (CRT) is developing rapidly in recent years. The activities of CRT are expanding globally, which can be seen from the increase of the number of CRT instruments transactions and the transfer across financial institutions. However, CRT, which will also have a negative impact on financial system stability can reduce the capability and flexibility of the financial system to withstand or resist risks; CRT will aggravate the instability among financial institutions, induce other risk factors in financial market, and increase the difficulty of financial supervision. The crisis will break out when the amount of the negative impact reach to a certain degree. Hence, we should considerate the impact of CRT on financial stability deliberately when we use the credit innovation.