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The recent spate of deposit flight that spread panic through the banking systems of the US and Europe opens a chance for non-bank lenders to seize more of the core businesses that banks want to retain. Central bank emergency measures may have prevented the crisis from spreading, but a new phase of disintermediation has begun.
One area of the capital markets that should benefit from the recent scare around banks is significant risk transfer (SRT): a type of synthetic securitization in which non-bank investors sell risk protection to banks against specific loan portfolios.
Once called capital relief trades and sometimes credit risk sharing, this is still a small market but one that has been growing at a roughly 18% annual trend rate over the past decade. It could now grow much faster as issuing equity and additional tier-1s becomes more expensive for banks.
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