IFRS 9 benefit welcomed

Category: Capital Relief Trades ABS


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The first-time adoption of IFRS 9 has had a muted impact on bank capital ratios and this has been reflected in existing capital relief trades through P&L gains (SCI 14 May). Indeed, the benefit can be acquired whether the first-loss tranche is sold or retained.

According to a structurer at a large European bank: “The silver lining in SRT deals is that if you sell the first-loss tranche and it’s properly structured, you may be able to offset provisions booked against the assets with an equal and opposite benefit for the SRT deal.”

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