EU watchdogs have not rejected a single application for a so-called significant risk transfer over the past five years, Financial News has learned, as a previously niche corner of banking continues to draw regulatory concern.

With banks forced to hold more capital since the 2008 financial crisis, SRTs have shot to prominence as a way to offload potential liabilities from lenders’ balance sheets and free up more lending. A counterparty such as a private credit fund agrees, for a fee, to pay out on any loans in a particular portfolio that fail, allowing the bank to offset that risk reduction against its capital requirements.