Banks eye synthetic securitisation to smooth IFRS 9 loan-loss volatility

New structures would help mitigate estimated 44% increase in loan-loss provisions from revised accounting framework

Dealers are putting a new twist on old-school risk transfer trades in a bid to reduce the sharp capital swings they expect to encounter under new accounting standards.

Several large European banks are understood to be in the advanced stages of structuring bespoke synthetic securitisations with the intention of smoothing expected spikes in loan-loss provisioning following the industry’s transition to IFRS 9, the new accounting regime set to enter into force in most jurisdictions on January 1

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