Moody's Talks - Focus on Finance Credit Risk Transfers a Net Positive for European and US banks, For Now
6 snips
Jul 9, 2025 
Warren Kornfeld, a Senior Vice President at Moody’s Ratings with expertise in banking, and Farooq Khan, a VP-Senior Analyst also at Moody's and based in London, dive into the intricacies of credit risk transfers. They discuss the balance banks strike by offloading credit risk, exposing both benefits and challenges. The conversation sheds light on counterparty risks, regulatory dynamics in the U.S. versus Europe, and the implications of semi-retail transactions. Transparency and investor concentration are key concerns as these transactions reshape capital management strategies.
AI Snips
Chapters
Transcript
Episode notes
Why Banks and Investors Use CRTs
- Banks use SRTs/CRTs to reduce regulatory capital requirements, enabling more lending capacity.
- Protection sellers gain attractive returns from pools of high-quality loans referenced in transactions.
European SRT Market Growth
- European SRT market is significantly larger and growing rapidly compared to the U.S.
- European SRT reference pools grew from €77 billion in 2021 to €156 billion in 2024.
U.S. CRT Market Smaller and Modest
- U.S. CRT issuance is smaller and less frequent, mainly by larger banks.
- The capital impact from CRTs in the U.S. remains modest, raising CET1 ratios by about 25 basis points.