DBS Group has finalised a synthetic securitisation tied to a USD 1 billion portfolio of corporate loans, marking a new approach to capital management for the Singapore-based bank.
The deal is also referred to as a significant risk transfer transaction. Under this structure, investors assume a portion of the credit risk associated with the underlying loan portfolio, while DBS retains ownership of the loans and continues to service them directly. In addition, through the process of transferring part of the credit risk to third-party investors, the bank is able to reduce the amount of regulatory capital it must hold against the portfolio, without removing the loans from its balance sheet.
This mechanism allows banks to free up capital that would otherwise be reserved to absorb potential losses, enabling that capital to be redeployed elsewhere in the business.
Capital management and regional expansion
According to DBS, the transaction supports more efficient capital management and is intended to free up capacity for additional client financing as the bank continues to expand its operations across the region. The bank also indicated that the deal establishes a framework that could allow it to pursue further synthetic securitisation transactions selectively in the future, suggesting this transaction may not be an isolated exercise but part of a broader capital optimisation approach.
Philip Fernandez, group corporate treasurer at DBS, said the transaction would allow the bank to maintain a disciplined approach to its balance sheet while continuing to pursue growth opportunities across its markets.
DBS stated that its capital ratios remain well above regulatory requirements, indicating that the securitisation was undertaken as a proactive capital management measure rather than out of regulatory necessity.
Market context
Synthetic securitisation and significant risk transfer transactions have become increasingly common tools among banks globally seeking to manage regulatory capital requirements while continuing to grow their lending books. By executing this transaction, DBS aligns itself with a practice more frequently associated with banks in Europe and the US, and positions itself among a smaller group of Asian financial institutions to use this structure for managing corporate loan exposure.
The transaction comes as banks across the Asia Pacific region continue to navigate capital adequacy requirements while pursuing regional growth strategies, particularly in corporate and institutional banking segments.
