Angela Ulum

A path back to growth for community banks: credit risk transfer trades

Many community and regional banks in the US are under intense pressure from economic forces that are outside of their control. These locally oriented banks are increasingly turning to credit risk transfer (CRT) trades as a way to reopen the lending pipeline. CRTs keep existing loans on a bank’s balance sheet, while de-risking the portfolio and providing substantial capital relief to fund new lending. Further, by shifting risk to non-bank investors, CRTs provide a new channel for private equity and others to deploy the funds that they have accumulated over the last several years.