In this paper, we explore the highly private bank regulatory capital transactions, specifically the Significant Risk Transfer (“SRT”) market that grants investors access to tap into a wide variety of exclusive on-balance sheet bank loans. We find that the current market environment, with the benefit of rising floating interest rates and banks issuing SRT transactions in large scale to maintain stable capital ratios, arguably represents a favorable fact pattern for SRT transactions that result in wider spreads/margins on investments than at any other time in the last five years.
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