Wall Street gets creative as regulators demand more capital

By transferring the risk to investors, Morgan Stanley could reduce the amount of capital it has to hold against those loans to cover for potential losses. — Reuters

WASHINGTON: Earlier this fall, Morgan Stanley bought US$300mil worth of protection against losses on some of its loans from Blackstone Group and other investors, two sources familiar with the matter say.

The transaction, details of which have not been previously reported, was effectively insurance, structured as a sale of bonds called credit-linked notes, according to the sources and regulatory filings.