UK to Make Bank SRT Deals Cheaper With Securitizations Revamp

UK financial regulators are set to bolster banks’ use of significant risk transfers by making it easier to do “unfunded” deals, where banks use insurance to cover potential loan losses.

The Bank of England will soon bring forward a consultation paper outlining the circumstances under which lenders can create those transfers, according to people with knowledge of the matter. The guidance is part of its wider post-Brexit revamp of the country’s rules on securitization.

Such a move would broaden the universe of investors for UK bank SRTs, something that would reduce their cost overall. In some cases, unfunded SRTs are ...