Explain how synthetic securitisation transfers mezzanine tranche credit risk while retaining legal loan ownership.
Finance & Banking
Significant Risk Transfer and Synthetic Securitisation for Bank Capital Relief
Structure significant risk transfer transactions and synthetic securitisations that release regulatory capital, covering tranching, pricing and supervisory approval.
🗓️Duration5 training days
📚Content4 modules · 8 sessions
🎓On completionAccredited attendance certificate
About the programme
Course Overview
Banks facing capital constraints increasingly turn to significant risk transfer transactions to release regulatory capital against a loan portfolio without selling the underlying assets or disrupting client relationships, and structuring these deals correctly is the difference between genuine risk transfer that a supervisor approves and a transaction later unwound for failing legal and economic transfer tests. This course explains how synthetic securitisation works: a bank retains legal ownership of a reference loan portfolio while transferring the credit risk of a mezzanine tranche to investors through credit-linked notes or financial guarantees, reducing risk-weighted assets and freeing capital for new lending. Participants work through portfolio selection criteria, tranche sizing and attachment point calculation, and the pricing dynamics that determine whether a transaction is economically worthwhile once investor spread requirements are compared against the capital relief achieved. The course covers the significant risk transfer tests supervisors apply, the documentation package required for approval, and the ongoing monitoring obligations a bank retains after closing, including replenishment period management and early amortisation triggers. Sessions close with a review of typical investor types and how deal terms are negotiated to satisfy both sides.
Expected Learning Outcomes
Select a reference portfolio suitable for significant risk transfer based on credit quality and diversification.
Calculate tranche attachment and detachment points that achieve the targeted capital relief.
Assess pricing dynamics comparing investor spread requirements against the value of capital released.
Apply the significant risk transfer tests supervisors use to approve a synthetic securitisation.
Build the documentation package required for regulatory notification or approval of an SRT transaction.
Design ongoing monitoring covering replenishment periods and early amortisation triggers after closing.
Who Should Attend
Bank capital management and treasury specialists structuring regulatory capital relief transactions.
Credit portfolio managers selecting reference assets for significant risk transfer deals.
Structuring bankers and investment bank teams arranging synthetic securitisation transactions.
Institutional investors evaluating mezzanine tranche investments in credit risk transfer deals.
Regulatory affairs and prudential risk staff assessing SRT approval requirements.
Rating agency and legal advisers working on synthetic securitisation documentation.
Course Modules
Select any module to see its sessions and points.
01Synthetic Securitisation Mechanics
2 sessions · 8 points
Session 1Structure and Risk Transfer Instruments
- Explain how credit-linked notes and financial guarantees transfer mezzanine tranche credit risk to investors.
- Distinguish funded from unfunded protection structures and their differing capital treatment.
- Map the cash flow waterfall between the reference portfolio, protection seller and protection buyer.
- Compare synthetic securitisation against traditional true-sale securitisation for capital relief purposes.
Session 2Reference Portfolio Selection
- Select a reference loan portfolio with sufficient granularity and diversification for investor acceptance.
- Assess historical default and loss data supporting the portfolio's expected credit performance.
- Exclude non-performing or watchlist exposures that would undermine the transaction's credit quality.
- Balance portfolio size against the fixed transaction costs of structuring an SRT deal.
02Tranching and Pricing
2 sessions · 8 points
Session 1Attachment Points and Tranche Sizing
- Calculate attachment and detachment points that isolate the mezzanine risk investors will absorb.
- Model expected loss and unexpected loss across the capital structure to size each tranche.
- Assess how tranche thickness affects the regulatory capital relief achieved under the standardised or IRB approach.
- Stress test tranche performance under adverse credit scenarios to validate structuring assumptions.
Session 2Investor Pricing and Deal Economics
- Compare investor spread requirements against the capital relief value to assess transaction economics.
- Negotiate premium payment structures between the bank and protection-selling investors.
- Assess the impact of transaction costs and legal fees on the net benefit of the SRT trade.
- Build a deal economics model presenting the transaction's return on regulatory capital to senior management.
03Regulatory Approval and Significant Risk Transfer Tests
2 sessions · 8 points
Session 1Applying the SRT Tests
- Apply the quantitative significant risk transfer tests supervisors use to confirm genuine risk transfer.
- Assess qualitative factors supervisors review, including retained risk and clean-up call provisions.
- Identify structuring features that could cause a supervisor to reject significant risk transfer recognition.
- Compare significant risk transfer requirements across jurisdictions where the bank operates.
Session 2Documentation and Supervisory Engagement
- Build the documentation package covering legal opinions, portfolio data and structuring rationale.
- Prepare responses to supervisory questions raised during the significant risk transfer approval process.
- Coordinate between legal, risk and capital management teams to meet regulatory submission deadlines.
- Plan the timeline from initial structuring to final regulatory sign-off for a typical SRT transaction.
04Ongoing Management and Market Practice
2 sessions · 8 points
Session 1Replenishment and Amortisation Monitoring
- Manage replenishment period rules governing the addition of new exposures to a revolving reference portfolio.
- Monitor early amortisation triggers that could accelerate the transaction ahead of schedule.
- Track portfolio performance metrics required for ongoing investor and regulatory reporting.
- Assess the operational processes needed to substitute or remove exposures during the transaction's life.
Session 2Investor Relations and Market Trends
- Identify the institutional investor types typically active in significant risk transfer mezzanine tranches.
- Negotiate deal terms balancing investor protection with the bank's flexibility to manage the portfolio.
- Assess how significant risk transfer market pricing has evolved as investor demand has grown.
- Evaluate a bank's broader capital management strategy for using SRT alongside other capital tools.
What the participant receives
4 course modules
A structured syllabus
8 training sessions
across 5 days
32 detailed points
Applied, detailed content
Accredited attendance certificate
On completing the programme
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