Financial Stability Board (FSB)’s Post

It seems the regional banking crisis a little over a year ago has largely been forgotten. Yet behind the scenes banks are eagerly looking to issue Synthetic Risk Transfers (SRTs) to private credit fund managers. Banks are doing this in a bid to free up costly regulatory capital requirements which are only increasing in response to the regional banking crisis last year. The largest fund managers are eager to invest in these SRTs, which have barely been used since the GFC due to their similarity to credit default swaps (CDS) but some differences exist. Dig into the benefits and risks. The article is posted on Accredited Investor Insights and linked in the comment below. Follow Leyla Kunimoto and Kris Rymer, CPA for more insights on being an Accredited Investor.

I do wonder about the growth of private credit. How much its growth reflects the implementations since Basel III vs the recent US regional banking crisis? Is it serving a newly created need? Or is it about skirting regulations/constraints in a high interest rate environment? Is it fast becoming a shadow banking sector? At the moment no one really cares, the gold rush is on. And Australian superannuation funds are increasingly looking at the sector. But this axis of private credit and equity could easily morph into something constituting systemic risk. #privatecredit #privateequity #superannuation

Published in May 2024 by the #Structured Finance Association, and noting that U.S. banks are increasingly using synthetic securitization to allocate regulatory capital more efficiently by transferring credit risk to outside investors through the issuance of credit-linked notes, this brief yet important post outlines the economic motivations for such #transactions, summarizes the two existing transactions #structures, and identifies instances where the federal government mandates similar risk transfer to reduce taxpayer #exposure. Synthetic securitization makes up more than 80% of SRT deals, according to European Central Bank data. In 2023, this type of SRT #issuance reached around $25 billion globally over reference loan portfolios totalling over €300 billion, Pemberton Asset Management estimates, excluding public-sector issuance. Synthetic SRT securitization deal numbers have been steadily increasing, from just 13 in 2010 to 115 in 2023. #derisking #GRC #riskmanagement #SRT #CRT #risktransfer #securitization #significantrisktransfer #CLN #creditlinkednote #Basel #regulatorycapital #riskexposure #creditrisk #capitaladequacy

Why has securitisation been a core balance sheet management tool for banks and other institutions for decades? KPMG UK's latest report on Securitisation & Balance Sheet Optimisation covers a review of Securitisation trends in Europe, the US and the UK, with a special focus on new trends in this growing market. Stay ahead of the curve and read the full report here: http://spkl.io/6046476Ug

Australian Prudential Regulation Authority has commenced consultation on its important response to avoid a SVB style collapse occurring in Australia. This represents a significant shift in the way APRA approaches regulation of small ADIs. What can mutual banks do to understand and respond to the consultation? Rhizome Advisory Group’s regulatory and financial risk experts with deep understanding of these changes can help your firm explore the implications and the options available to prepare for these important changes. #riskmanagement #regulation #resilience

As credit markets evolve, the dynamic between bank and nonbank #lending institutions continues to change too. The disintermediation of banks and concurrent growth of private #credit funds has been well documented, as have the burgeoning partnerships between large financial institutions and asset managers seeking to partner on direct lending initiatives. Additionally, Significant Risk Transfer (SRT) has emerged as a further mainstream means through which banks and investment firms can operate in a symbiotic manner. SRT allows banks to retain more operational normality in the face of increasingly stringent #regulatory controls, while investment firms can benefit from a product that offers attractive and differentiated risk-adjusted returns. Read our S&P Global Market Intelligence article to learn more: https://okt.to/BH9gaR

If ever there was an infographic I wish I'd created to explain to my colleagues and clients what the FCA (IOSCO, Bank of England and PRA) are attempting to solve for in relation to #privateEquity and #privateCredit - then here it is. The related #FCAprivatemarketvaluationreview is underway and firms concerned will need to justify the adequacy of their control frameworks, governance and oversight in order to meet evolving [risk adjusted] regulatory expectations in this regard. We can help. Feel free to reach out. #continuationfunds; #navlending; #adhocvaluation

In response to the CBN's new capital directives, we have refined our prior thought leadership document. We present the updated edition, ‘Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation – Version 2.0’.   This revision encapsulates the latest developments and furnishes a thorough analysis designed to guide the Banking sector through the impending changes.   Our report examines the CBN’s recapitalisation plan and provides a critical assessment of the current position of banks across various authorization type — international, national, and regional. We assessed the adequacy of the banks’ existing capital in relation to the new requirements and estimate the additional capital that each bank will need to raise to comply with these updated regulatory requirements.   Additionally, we explore potential funding sources and strategic opportunities for banks to utilize the newly raised capital to generate attractive, risk-adjusted returns for their investors.   Please find the attached updated publication for your perusal. We are eager to hear your thoughts and address any inquiries you might have. 

In response to the CBN's new capital directives, we have refined our prior thought leadership document. We present the updated edition, ‘Navigating the Horizon: Charting the Course for Banks amid Plans for Recapitalisation – Version 2.0’. This revision encapsulates the latest developments and furnishes a thorough analysis designed to guide the Banking sector through the impending changes. Our report examines the CBN’s recapitalisation plan and provides a critical assessment of the current position of banks across various authorization type — international, national, and regional. We assessed the adequacy of the banks’ existing capital in relation to the new requirements and estimate the additional capital that each bank will need to raise to comply with these updated regulatory requirements. Additionally, we explore potential funding sources and strategic opportunities for banks to utilize the newly raised capital to generate attractive, risk-adjusted returns for their investors. Please find the attached updated publication for your perusal. We are eager to hear your thoughts and address any inquiries you might have.

*New report by Minal Chotai CFA, FRM* The way that GSIB capital requirements are calculated and the tactics banks use to reduce their capital needs have contributed to some unusual market disruptions in repo financing and other activities in recent years, especially in the fourth quarter. The proposed changes to the GSIB rules could have a lasting effect on how sell-side firms provide intermediation and financing services, which until now have mostly been affected by year-end pressures. https://lnkd.in/eyQDuQ5h