North American banks face substantial cyclical and structural challenges. These include a difficult interest rate and credit environment, changes to capital rules, and increased competition from non-bank credit providers — impacting the business models of traditional banks, and subsequently creating uncertainty and volatility.
One increasingly popular option for addressing these challenges is the use of Credit Risk Transfer (CRT) solutions, which can help banks mitigate credit risk, enhance capital efficiency, and build strategic partnerships with insurers and private capital managers.
Solutions amid growing headwinds
Drawing on our collective expertise in executing Non-Payment Insurance (NPI) and CRT/Significant Risk Transfer (SRT) transactions for North American and European banks, Marsh, Guy Carpenter and Oliver Wyman collaborated on a joint Marsh McLennan report: Expanding the Portfolio Management Toolkit: A Primer on Credit Risk Transfer (CRT) Solutions for North American Banks.
The report provides a detailed overview of the process, benefits, and strategic considerations involved in establishing CRT programs, structuring and distributing CRT solutions, and assessing the financial impacts. A wide range of CRT mechanisms are explored, highlighting how they can improve banks’ credit portfolio management. The report also looks at the European SRT market’s history to illustrate the potential for CRT solutions in North America, with an emphasis on the significance of regulatory developments and the strategic benefits of adopting CRT solutions.
For banking professionals, investors, financial strategists, and more, this report offers essential insights on the role of CRT solutions in advancing portfolio management, along with valuable perspectives on the evolution of the broader CRT market.
Authors:
Guy Carpenter:
- Michael Shemi, Managing Director, North America Structured Credit Leader
- Jeffrey Krohn, Managing Director, Mortgage and Structured Credit Segment Leader
- Timothy Armstrong, Managing Director, Mortgage & Structured Credit
- Andrew Feachem, Managing Director, EMEA Structured Credit Leader
Marsh:
- Azzizza Larsen, Senior Vice President, Lenders Solutions Group Leader for US & Canada
- Mark McLeod, Managing Director, US Structured Credit & Political Risk Practice Leader, Credit Specialties
- Marcus Miller, Managing Director, Global Lenders Solutions Group Leader, Credit Specialties
Oliver Wyman:
- Julian Gorski, Partner, Corporate and Institutional Banking
- Randy Lampert, Principal, Finance and Risk
- Paulina Symala, Associate, Corporate and Institutional Banking
- Roshannah Gaur, Consultant