DBS lays groundwork for significant risk transfers, sources say

SINGAPORE – DBS Group Holdings is weighing a foray into the market for significant risk transfers (SRTs) as lenders increasingly turn to such deals as a way to drive growth and absorb shocks.

South-east Asia’s largest bank held preliminary talks with funds investing in SRTs, according to people familiar with the matter. Preparations are at early stages and specific transactions have not been discussed. 

Banks use SRTs as a way to insure loans against default. The transactions, which are often structured as credit-linked notes, allow lenders to boost their solvency ratios and reduce their reliance on less shareholder-friendly options like issuing new equity or cutting dividends.

They also increase their leeway for new lending, acquisitions or shareholder payouts.

A representative for DBS declined to comment.

Acquisitions have been part of its growth strategy. It is looking to buy up to 30 per cent of Alliance Bank Malaysia. It purchased Citigroup’s consumer banking business in Taiwan in 2023 and increased its minority stake in China’s Shenzhen Rural Commercial Bank in 2024. 

DBS is considering an SRT transaction after Standard Chartered carried out a similar deal tied to US$1.5 billion (S$1.9 billion) of trade finance loans in 2025, which allowed the bank to claim capital relief for its Singapore subsidiary.

The significant transfer market is set to double over the next five years, according to Man Group estimates. While most of these deals are issued by banks in Europe and North America, lenders in other regions are also eyeing the instruments. 

Sumitomo Mitsui Banking’s Asia-Pacific arm completed its first US$3.2 billion synthetic risk transfer deal with Blackstone, Stonepeak Partners and Clifford Capital in 2025.

First Abu Dhabi Bank and Abu Dhabi Commercial Bank are considering debut SRTs. BLOOMBERG