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Transfer Risk

  • Transfer risk is the risk that the government will impose restrictions on the transfer of funds by debtors in the country in question to foreign creditors, either for financial or other reasons. This risk is almost exclusively related to foreign currency exposure
  • Transfer risk is one facet of country risk and refers more narrowly to the risk associated with the availability of foreign currency to service a country’s external debt
  • It also relates to the impact of devaluation and other factors that affect the overall availability of foreign exchange and hence a borrower’s ability to honour his obligations abroad including a foreign authority placing restrictions on transfers

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