Basel Committee Publishes Report On Synthetic Risk Transfer Markets

In Short

The Background: The Basel Committee on Banking Supervision has published a comprehensive report analysing the rise of synthetic risk transfer ("SRT") markets, finding that synthetic risk transfer transactions have become a significant source of capital relief for banks managing corporate credit risk, with protected assets in major jurisdictions estimated at approximately EUR 750 billion while consistent regulatory requirements are still under development.

The Result: The report identifies market trends and key supervisory concerns and suggests mitigants and other potential solutions for market participants and regulators.

Looking Ahead: As the SRT market continues to grow, stricter monitoring, potential limitations on capital relief, stricter transparency requirements, and closer coordination between banking supervisors and non-bank financial institution supervisors should be expected. Although the BIS report lacks binding legal force, it is likely