BNP Paribas increased its footprint in synthetic significant risk transfers last year, recording securitization exposure in its non-trading book of €66.7 billion, up from €46.5 billion at the end of 2024. The change equates to a 43% increase in exposure to originated synthetic SRTs, according to the bank's latest annual report.
Synthetic SRT transactions have swelled in recent years as new issuers and a widening base of buyers have entered the market. Financial institutions typically use SRTs to insure portions of their loan portfolios against credit losses, which can reduce regulatory capital requirements tied to those exposures. By materially shifting credit risk away from the lender, SRTs can free capital that banks may deploy back into lending or distribute to shareholders through dividends and share buybacks.
Banco Santander also reported substantial securitization exposure, reaching €74 billion last year, a modest rise from €73 billion in the prior year, based on its corporate filings. That comparative data highlights how multiple large European banks are making growing use of securitization structures to manage balance-sheet capacity.
The acceleration in synthetic SRT usage has prompted scrutiny from regulators. The European Central Bank has urged lenders to prefer transactions that transfer the whole loan off the balance sheet, citing concerns about circular transfers of risk. Synthetic SRTs, by contrast, only shift the credit risk component rather than removing the underlying loan from the balance sheet entirely.
For banks, the mechanics and accounting of SRTs affect measures that investors and analysts follow closely - including capital ratios and the amount of capital available to support new lending or shareholder returns. The tension between banks' incentive to optimize capital efficiency and regulators' focus on clear risk transfer outcomes is central to the ongoing debate over the appropriate role and structure of securitizations.
While the figures from BNP Paribas and Banco Santander illustrate a notable uptake in SRT use, public disclosures and regulatory commentary indicate continued attention on whether the current mix of transactions adequately severs the economic risk or instead leaves residual linkages on lenders' balance sheets.