Global banks are increasingly shifting credit risks to external investors. What does this mean?

Eurozone and US banks are increasingly shifting credit risks to private investors, thereby freeing up capital for loans in more profitable areas. Such transactions are concluded for amounts starting from € 20 million, while the final investor does not always have detailed information on the risks. The market for these transactions is growing despite the ongoing conflict in the Middle East, which is alarming for central banks, as the risk transfer system creates a blind spot in regulation, and it has not yet been tested by serious economic crises. Why the situation with risk transfer transactions resembles the conditions preceding the 2008 crisis, and what is the likelihood of its recurrence — in the Izvestia article.

What kind of tool and why did it appear?

• The synthetic risk transfer (SRT) tool assumes that banks transfer credit risks to third-party investors without writing off real assets from their balance sheet. After the 2008 crisis, the Basel Committee on Banking Supervision (an organization that develops common standards and methods for regulating banking activities adopted in different countries, which are advisory in nature, but are often taken into account by central banks) tightened the requirements for banks: in particular, now, when issuing a loan, they must reserve funds in case of possible losses and "to maintain solvency." during the economic downturn" (a document known as Basel III).

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• But banks are interested in making the money they have work. SRT transactions allow them to free up funds needed to maintain liquidity and use them to issue new loans. Purchasers of risks can be insurance companies, hedge funds, pension funds or private investors.

In this case, the investor receives loan bonds for the amount of collateral and risk compensation — regular fixed premiums or floating-rate coupon payments. In conditions of global instability in the markets, the rate usually increases, and with it the payouts increase — this explains the attractiveness of SRT transactions for investors. And if the borrower proves to be in good faith and pays off the loan on time, the investor will receive back the deposit.

• As a tool for reducing risks and freeing up bank funds, SRT transactions have become widespread in the European Union and the United Kingdom, which account for up to 70% of global SRT transactions. This practice is less popular in the United States, as the requirements for the banking sector here are milder than in Europe. SRTs allow banks to reduce weighted average asset risks by 50-80%. Thus, banks can also raise their rating and improve forecasts for a possible default.

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Risks of such transactions

• The main danger of SRTs is that they often only mask credit risks. Investors use borrowed capital, which they are lent by the banks themselves. According to the European Central Bank (ECB), in 2024, banks were 57-66% more likely to enter into transactions with non-bank investors who had loans from them. For the regulator, such transactions are a blind spot, because information about loans issued to private investors is not disclosed. According to the Basel Committee's report published in February 2026, SRT transactions and their financing remain opaque, and the measures developed by Basel have not yet shown their effectiveness. It turns out that banks formally retain liquidity, but vulnerabilities in bank capital continue to accumulate.

• In accordance with the requirements of Basel III, the transfer of risks from a bank to an investor must involve a significant share of capital, therefore transactions are concluded for amounts from €20 million and above: the abbreviation SRT also stands for significant risk transfer. The object of such transactions should be the risks of debt obligations with an average risk of non-payment ("mezzanine"), but the bank is always tempted to shift high-risk "junk" debts to a private investor. In April 2025, the Bank of England warned about the lack of proper verification of such transactions (for the period from 2000 to 2025, the ECB did not reject any SRT transactions), and the danger of packaging illiquid assets in a trading offer in the form of SRT, which is practiced by some banks.

• In the case of SRT transactions, banks are maximally protected, but investors do not have detailed information unless the credit institution wants to disclose it itself. It is also unsafe to assess the riskiness of a transaction based on market indicators, because they do not reflect the real state of affairs. As the risks increase, the gap in profitability between positions narrows, because the competition is for high-risk assets, whose profitability can exceed 10%. As a result, investors assume credit risks at a disproportionately lower price, despite the increasing risk of payment defaults. Since such transactions are often concluded by insurance and pension funds, possible losses can also provoke social tension.

The likelihood of a repeat of the 2008 crisis

• Although SRT is similar to the use of secured credit obligations that existed before 2008, such transactions are less complex, they do not involve the transfer of real assets, which makes banks more resilient. The protection of the banking system has been enhanced by the implementation of Basel requirements. In addition, the 2008 crisis was caused by a bubble in the mortgage lending market, and SRT is a more diversified instrument that includes the risks of not only mortgage loans, but also car loans that require a lot of capital, but are extremely rarely non—repayable.

• The ECB considers the instrument reliable: it has not yet been tested by a serious economic downturn, but it has successfully survived the difficulties of 2022 and the transition of the EU economy to a military track. Transaction control has increased since 2008, and the financial system itself has undergone changes: now it is more complex and includes a larger number of influential players, so the crisis cannot spread "from the center to the periphery," from the bank to smaller participants in the financial system. Cross-border transactions and the transfer of risks to investors outside the euro area are also considered a security factor because they avoid risk concentration.

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• At the same time, the complexity of the financial system creates another danger — due to the large number of interconnections and their opacity, as well as due to the growing dependence of banks on private capital participation, it is impossible to determine the level of stability of credit institutions, as well as the real volume and concentration of risks. In a negative scenario, such transactions can become a "channel of infection" for the global financial system.

• The opacity of the private investment sector makes it impossible to determine either the creditworthiness of the purchasers of SRT transactions or the concentration of bank debt risks in their hands. According to the ECB, two thirds of the SRT bonds issued by European banks between 2018 and 2024 are owned by 65 non-bank investors. Investors are most interested in commercial and residential real estate debts, car loans, and financing projects related to artificial intelligence. This may also be a risk factor, as experts have repeatedly warned about an inadequate assessment of the AI market (we wrote about investors' concerns about the bubble in the market here).

• The growing popularity of SRTs and their proliferation without the necessary control from financial regulators may pose a threat. According to Bloomberg, at the end of 2025, about 11.1% of corporate loans from the largest European banks were related to SRT operations — this figure has doubled since 2022. The largest player in the SRT market is the European banking group UniCredit SpA, which has increased the number of such transactions 14 times in three years, while investors agree to take part of the damage on non-repayable debts. But the risk of a repeat of the "great financial crisis," as it is called in the Western press, is still low.