European banks are increasingly deploying synthetic risk transfer (SRT) transactions to manage private credit exposures, using bespoke transactions to free up capital, reduce concentrations and support continued lending.
Key findings:
Banks in Europe are using SRTs to manage private credit exposures across infrastructure debt, subscription lines and NAV facilities.
Exposures to private credit and private equity funds — particularly fund-finance structures — are viewed by investors as high quality, and trade at tight spreads.
Capital relief remains the primary driver as private credit loans attract high risk weights, creating strong SRT incentives.