Fed green lights more capital relief trades

Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees

The US Federal Reserve has given five regional banks permission to treat credit-linked notes (CLNs) that transfer default risk to investors through financial guarantees as synthetic securitisations for capital purposes.

The relief – which was granted in a series of letters sent to Ally Financial, Huntington Bancshares, Santander USA, Truist and US Bancorp between November of last year and the beginning of this month – could add more fuel to an already red-hot market for credit risk transfer (CRT)