Regional banks in the US are considering adding significant risk transfer techniques to their M&A arsenal, if not already actively deploying them in the context of takeovers, according to panelists speaking at the FT Live Risk Transfer conference 14 May. They would be following in the footsteps of banks in other countries that are said to have been using SRT to support merger activity for years.
“We are starting to see smaller new entrants’ really interesting tactical utilization of SRT,” said Mark Kruzel, head of banks at SMBC, speaking at the conference. “There are banks now, in the context of M&A, issuing SRT to help pay for the capital contributions.”
Given the increasing popularity of SRT transactions for a variety of reasons, it is hard to link an individual SRT definitively to M&A activity — it may just be coincidence. However, SRT can ameliorate a bank’s common equity tier 1 (CET1) ratio, which can be helpful when presenting shareholders with an M&A transaction.
The trend is not unique to US regional banks, nor is it completely new. As is often the case in the SRT market, US banks are cautiously wading into a strategy their European and Canadian counterparts...
