Portfolio Credit Guarantees Guarantees applied to a pool or portfolio of loans or credit exposures. Key Features The guarantor assumes a predefined level of credit risk across the entire portfolio.Risk-sharing across multiple loans or credit facilities.Guarantee terms often specify limits, such as coverage for first-loss tranches or a percentage of losses. Examples Government-backed SME loan guarantee schemes covering a portfolio of small business loans.Structured finance products such as credit default swaps (CDS) or collateralized loan obligations (CLOs). Advantages Diversifies risk across many borrowers.Economical and scalable for lenders and guarantors.Encourages lending to broader sectors, including higher-risk segments. Disadvantages May not fully cover individual borrower defaults.Requires robust portfolio management and risk assessment systems.
