Many regional and community banks in the United States are under intense pressure from economic forces beyond their control. This has led to a contraction in the lending markets, and may even shut off the spigot for some asset classes.
Some banks might look to credit risk transfer (“CRT”) trades to keep the lending pipeline open. These cutting-edge transactions keep the loans on a bank’s balance sheet, while eliminating risk from the portfolio” and providing substantial capital relief. Further, by shifting risk to non-bank investors, CRTs provide a new opportunity for private equity and others to use the powder that they have accumulated over the last several years.