Synthetic risk transfers, in which banks purchase insurance-like protection on some of their loans, is a growing market on Wall Street, with billions worth of deals made in the US last year. But of course, anything with the words "synthetic" and "risk transfer" is probably going to remind people of the 2008 financial crisis, when securitizations of loans blew up and infected the banking system. So what exactly are these new trades? Why do banks want to do them and what are investors getting in return for taking on this risk? In this episode, we speak with Michael Shemi, North America structured credit leader at Guy Carpenter, about what these deals are, how they're structured, and what they say about bank capital and the wider financial system.

Mentioned in this episode:
One of the Hottest Trades on Wall Street, An Etymological Study
JPMorgan’s Risk Swap Ends Up at a Familiar Place: Rival Banks
‘Blind’ Bets on Bank Risk Transfers Have Never Been So Popular

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Synthetic risk transfers, in which banks purchase insurance-like protection on some of their loans, is a growing market on Wall Street, with billions worth of deals made in the US last year. But of course, anything with the words "synthetic" and "risk transfer" is probably going to remind people of the 2008 financial crisis, when securitizations of loans blew up and infected the banking system. So what exactly are these new trades? Why do banks want to do them and what are investors getting in return for taking on this risk? In this episode, we speak with Michael Shemi, North America structured credit leader at <a href="https://www.guycarp.com/insights/2024/06/report-describes-CRT-solutions-North-American-banks.html" data-cke-saved-href="https://www.guycarp.com/insights/2024/06/report-describes-CRT-solutions-North-American-banks.html">Guy Carpenter</a>, about what these deals are, how they're structured, and what they say about bank capital and the wider financial system. Mentioned in this episode: <a href="https://bloom.bg/4fRj1jn">One of the Hottest Trades on Wall Street, An Etymological Study</a> <a href="https://bloom.bg/3Xc5dZp">JPMorgan’s Risk Swap Ends Up at a Familiar Place: Rival Banks</a> <a href="https://bloom.bg/4dQ2BpF">‘Blind’ Bets on Bank Risk Transfers Have Never Been So Popular</a> Only <a href="http://Bloomberg.com" data-inline-card="" data-card-data="">Bloomberg.com</a> subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  <a href="https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast">bloomberg.com/subscriptions/oddlots</a>

Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets and economics. Join the conversation every Monday and Thursday.

Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets and economics. Join the conversation every Monday and Thursday.

Bloomberg's Joe Weisenthal and Tracy Alloway analyze the weird patterns, the complex issues and the newest market crazes. Join the conversation every Tuesday and Thursday for interviews with the most interesting minds in finance, economics and markets.

Odd Lots

On Bloomberg’s Odd Lots podcast Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets, and economics. Join the conversation every Monday and Thursday. 

On Bloomberg’s Odd Lots podcast Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets, and economics. Join the conversation every Monday and Thursday.

The Hottest Way for Banks to Get Risk Off Their Balance Sheets

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/016c8946-3dea-4c17-a47b-b1d301570d7e/transcript

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