Banks Turn to SRTs to Hedge Rising Commercial Real Estate Risks

Banks are ramping up their use of significant risk transfers to hedge against commercial real estate defaults as economic fallout from conflict in the Middle East piles pressure on the sector.

NatWest Group Plc completed an SRT tied to £3.5 billion ($4.7 billion) of CRE loans in March, its second such deal in four months, Bloomberg has reported. Other lenders talking to investors about potential CRE-linked deals include BNP Paribas SA, Banco Santander SA and Commerzbank AG’s Polish unit.

“We are seeing a pickup in activity, and current momentum suggests CRE-backed SRTs will feature more prominently over the ...