The European market for significant risk transfer (SRT) transactions has grown substantially in recent years. These financial instruments are primarily used by banks to transfer credit risk associated with a portfolio of loans to external investors without physically selling the loans. By doing so, banks can free up regulatory capital and allow for more lending capacity while retaining the underlying loans on their balance sheets.
In this article, we discuss the risk, regulatory and operational challenges faced by banks and investors for SRT transactions. We explain the large number of parameters that need to be optimised to find an efficient SRT transaction that meets regulatory requirements and investors’ risk appetites. We start with an overview of current market conditions.
Further insights from a recent industry conference can be found here:
NPL Markets offers comprehensive data management, valuation, and reporting services to address the operational challenges banks and investors encounter in preparing and managing SRT transactions.
We assist banks in preparing and standardizing transaction data while helping to select the most suitable transaction portfolio to optimize balance sheet impact.
With automated reporting pipelines, we ensure all investor and regulatory reporting requirements are met. For investors, NPL Markets provides support with deal screening, due diligence, initial valuation, as well as offering online tools for revaluation and ongoing reporting.
