Investors, lawyers keen to expand risksharing deals on offer
Structures under review could give market access to insurers
Banks shed around 25 bln in loan risk via transfers in 2023
U.S. lenders flocking to market, but rules are strict

NEW YORKLONDON, Feb 1 Reuters A financial product that enables banks to shed risk from loan portfolios is gaining more popularity among lenders in the United States, with investors and lawyers devising new structures to broaden its appeal.

In deals known as credit risk transfers, banks effectively buy insurance from hedge funds and other investors against the risk of losses from loans. The deals can free up precious capital for lenders, while producing juicy returns for investors and handsome fees for the arrangers.

The market for these products, already well established in Europe, has drawn more attention from U.S. players since the regional banking failures in March prompted lenders to look for ways to build capital cushions to appease regulators.

But structures currently in use come with constraints. U.S. regulatory requirements set by the Federal Reserve restrict participation from insurance companies in these deals. The types of loans, mostly auto and mortgages, also limits the pool of potential investors, five investors and lawyers involved in credit risk transfer deals said.

Now, some of those parties are pitching U.S. lenders with different variations of credit risk transfer products that could address those issues….