DBS brings first synthetic securitisation to market

The $1.29b transaction expands the bank's capital toolkit to support future lending growth.

DBS Bank has completed Singapore's first synthetic securitisation transaction, referencing a $1.29b (US$1b) diversified portfolio of corporate loans to strengthen its capital management capabilities.

Through the structure, investors assume part of the portfolio's credit risk, allowing DBS to reduce the regulatory capital required for those assets whilst continuing to own and service the underlying loans, said DBS.

Synthetic securitisations, also known as significant risk transfer (SRT) transactions, are widely used by global banks to manage capital and risk.

DBS said the transaction strengthens its ability to optimise capital and redeploy it towards new lending and growth opportunities.

The bank said the deal also establishes a foundation for it to selectively undertake more SRT transactions in the future.

Although its capital ratios remain well above regulatory requirements, the additional capital management capability is expected to support rising financing demand across the region.

Philip Fernandez, group corporate treasurer at DBS, said the transaction strengthens the bank's ability to maintain capital and balance sheet discipline whilst supporting the continued expansion of its regional franchise.

DBS said the transaction also broadens access to a risk management structure commonly used in global financial markets, making it the first Singapore bank to execute such a transaction.

($1 = US$0.77)