CRT Transactions In The EU, U.K. And The U.S.

In this bulletin, we consider the current state of the EU, U.K. and U.S. markets for credit risk transfer ("CRT") transactions, with a particular focus on the fund finance market¹

For a more in-depth introduction to this complex and evolving topic, our recent report, CRT and SRT trades: an introductory guide for issuers and investors,² provides an overview of the key issues for originators and investors.

The primary motivation for a bank/originator to enter into CRT transactions is to reduce the amount of regulatory capital that it has to hold against its underlying loans. There may be other drivers, such as managing concentrations of risk to certain sectors/borrowers. From an investor's perspective, CRT transactions provide attractive risk adjusted- returns and an opportunity for portfolio diversification.