SRT market struggles with marks as SMEs, corps face crisis

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By Owen Sanderson
19 Mar 2020

The synthetic risk transfer market, where specialist hedge funds write protection on up to €100bn of notional risk per year from banks, is grappling with the impact of the coronavirus on SME and corporate credit. The illiquid bilateral transactions barely trade, but have increasingly been financed through the repo market, giving banks and funds a challenge as they fight over where the positions should be marked.

According to participants at IMN’s significant risk transfer conference in February, before the market tanked, more than eight banks are now offering repo financing against significant risk transfer deals — allowing the hedge funds active in this market to leverage their positions.

Nomura was once the main bank ...

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