In a house-cleaning move, several major banking institutions are trying to rid itself of the credit portfolios that had been the major cause of the 2008 global financial crisis. This is another blow to the banks who need to sell them at a loss at a time that they are still in recovery mode from the recession. This though is the better move, as unloading these risk assets would be more cost effective than having to recover equity over them.

These instruments consist of credit default swaps that created risk exposure to banks and other companies, called synthetic collateralized debt obligations. These complex derivatives are hard to remove from existing portfolios, but there are some credit hedge funds like BlueMountain Capital and Renshaw Bay that can provide assistance to banks to extricate themselves from these quagmire securities.

While total outstanding synthetic CDOs fell to US$25 billion from a height of US$105 billion back in 2007, there are still many of these floating in balance sheets that continue to make ripple effects on banks that are back in the black after so many years operating at a loss.