DBS completes US$1 billion significant risk transfer deal, a first for Singapore bank

[SINGAPORE] DBS has completed a significant risk transfer (SRT) transaction referencing a US$1 billion portfolio of corporate loans, marking the first such deal by a Singapore bank, it said on Tuesday (Jun 30).

An SRT is a capital management transaction that allows a bank to transfer part of the credit risk on a pool of loans to third-party investors, without selling the underlying loans.

Under the arrangement, investors bear a share of the referenced portfolio’s credit risk. In return for taking on that risk, they receive a premium or yield that is typically higher than similarly rated traditional bonds, while allowing the bank to continue owning and servicing the loans.

DBS did not identify the third-party investors in its announcement.

For the lender, the transaction reduces the regulatory capital that has to be held against these assets. This frees up capital that can be redeployed towards new lending and growth opportunities.

“While DBS’ capital ratios are well above regulatory requirements, this new capability enhances the bank’s ability to support Asia’s rising demand for financing and reflects the bank’s ongoing expansion of its capital management toolkit,” the lender said.

“It also establishes a foundation for the bank to selectively execute more SRT transactions in future,” it added.

As at Mar 31, 2026, DBS’ Common Equity Tier 1 (CET1) ratio stood at 16.9 per cent, down from 17.4 per cent in the year-ago period.

The CET1 ratio measures a bank’s highest-quality capital against its risk-weighted assets, and is a key gauge of its ability to absorb losses. In Singapore, banks are required to maintain CET1 ratios above minimum regulatory levels set by the Monetary Authority of Singapore.

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On a fully phased-in basis, DBS’ CET1 ratio stood at 14.8 per cent as at end-March, down from 15.2 per cent a year earlier. Both ratios were comfortably above mandated regulatory requirements.

The lender’s Tuesday announcement also confirms earlier reporting by Bloomberg in January that it was weighing such a foray.

Philip Fernandez, group corporate treasurer at DBS, said: “This debut transaction strengthens our ability to maintain strong capital and balance sheet discipline and prudently capture opportunities as we scale our franchise.”