Regulatory Capital Relief Investment Primer

What are regulatory capital relief transactions?
The term “regulatory capital relief” can be applied to a variety of transactions used by banks to optimize capital levels, reduce balance sheet concentrations, manage lending capacity, and respond to regulatory and/or accounting changes. In the past, the term was used to describe transactions ranging from the outright sale of non-performing loan portfolios to securities referencing pools of performing loans held on bank balance sheets.

ArrowMark focuses on regulatory capital relief (aka significant risk transfer or credit risk sharing) transactions referencing pools of performing collateral and, as a result, comments throughout the remainder of the document are specific to this opportunity set. Securities backed by revolving lines of credit and term loans to large corporate borrowers represent the bulk of current and historical issuance. Collateral can also include term loans to small and medium enterprises,

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