Asset Managers and Insurers Now Absorb Most Bank Credit Risk
Banks transferred credit risk on more than €905 billion ($1 trillion) in loans by the end of last year through significant risk transfer deals, a 26% increase from the prior year, according to the International Association of Credit Portfolio Managers. Lenders issued €30 billion in new SRT transactions linked to €378 billion in underlying loans in 2025. The instruments allow banks to shift default risk on loan pools to investors, who receive returns often in the low double digits, while banks reduce their regulatory capital requirements and free up balance sheet capacity.
Diversified asset managers invested €7.5 billion in SRTs last year, up from €2 billion in 2022, according to the survey. Together with specialized SRT credit funds, they now represent more than 70% of the investor base. Insurance companies invested €2.8 billion, primarily through unfunded credit protection guarantees. Blackstone provided first-loss protection on a €2 billion ABN Amro corporate loan portfolio, while Brookfield’s Oaktree Capital Management is hedging credit risk on $2 billion of Deutsche Pfandbriefbank commercial real estate loans. Austria’s Erste Group Bank used insurers for an SRT linked to more than €10 billion of loans to fund its acquisition of Santander Bank Polska.
Corporate and small-to-medium enterprise loans still comprise more than 70% of the underlying loan pools, but transactions tied to specialized lending such as real estate and project finance are growing. European Union banks issued SRTs on €241 billion of underlying loans last year, while looser capital requirements in the United States have reduced American banks’ incentives to pursue such deals. Regulators including the Bank of England, the European Central Bank, and the Financial Stability Board have warned about potential systemic risks from bank lending to private credit funds and other shadow banks that purchase SRTs, cautioning about interconnections and rollover risk.
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