Goldman Sachs, Morgan Stanley and Bank of America scrutinize SRT buyers' use of leverage

U.S. banks including Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp are asking investors to disclose whether they plan to take on extra debt to invest in significant risk transfer (SRT) instruments as regulators scrutinize whether they pose a threat to financial stability, people familiar with the matter said. Investors have been asked the question in recent months as the rollout process begins. Authorities are warning against leverage by investment firms looking to buy SRTs, a type of transaction that helps banks sell the risk associated with their loan portfolios. Because the debt supplier is another bank, to some extent the credit risk is simply transferred to another part of the financial system.