Barclays and Santander lead European banks’ significant risk transfer activity
Significant risk transfer (SRT) securitizations are an established part of European banks’ capital and risk management toolkits, S&P Global Ratings noted in a report published today (see Banking Brief: Barclays And Santander Lead European Banks’ Significant Risk Transfer Activity).
Pillar 3 disclosures on retained SRT tranches indicate that the region’s largest lenders dominate issuance volumes, led by Barclays and Santander. Some midsize banks are also active relative to their balance sheet sizes.
“We think that SRT issuance will grow and become broader based as further banks look to manage their credit portfolios more actively through the implementation of the final Basel III standards,” said S&P Global Ratings credit analyst Richard Barnes.
Moving forward, we expect regulatory changes will influence the development of the European SRT market. European regulators appear generally supportive of SRTs and the broader securitization market.
SRTs are likely to become more expensive for issuers. Despite the regulatory concessions, we expect that banks will need to sell thicker tranches to achieve capital relief under the final Basel III standards. In addition, as SRT supply increases, transaction pricing may not remain as favorable to issuers as it has been so far this year.
This report does not constitute a rating action.
