KBRA releases research that examines the use of synthetic risk transfer (SRT) transactions referencing a variety of collateral types tied to corporate debt. The use of private credit corporate SRTs in the U.S. is expected to increase as banks seek to optimize regulatory capital pursuant to Federal Reserve guidance from 2023 and the implementation of Basel 3 Endgame. This KBRA report discusses market growth, alignment of interests, and various structural features.

While the opaque nature of the SRT market makes growth difficult to quantify, the International Monetary Fund (IMF) estimates that approximately $1.1 trillion in assets were synthetically securitized between 2016 and mid-2024 globally. The International Association of Credit Portfolio Managers (IACPM) estimates that over EUR700 billion of securitized loans were protected by EUR64 billion (9%) of SRT tranches by year-end 2024, with about 70% issued by European banks. Going forward, U.S. banks are anticipated to play an increasing role in SRT activity.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1011534

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