Back to Basics: Significant risk transfer transactions

Significant Risk Transfer (SRT) transactions (also known as Bank Capital Relief trades) are used by banks to manage and reduce their regulatory capital requirements. These transactions allow the banks to transfer a significant portion of the credit risk associated with a portfolio of assets (such as loans) to third party investors, enhancing the bank’s capital efficiency and managing risk exposure, without needing to raise equity or sell assets. SRT represents an opportunity for investors to gain exposure to a diversified pool of performing corporate and consumer loans, which have had historically stable performance even in times of market distress.

Douglas Charleston (Partner, Portfolio Management) and Pauline Quirin (Portfolio Management), from our Asset-Backed securities team provided a comprehensive understanding of the key aspects and trends within the SRT market.