ECB Is Asking Banks About Funding to SRT Buyers, Machado Says

The European Central Bank is probing to what extent banks are financing investments in significant risk transfers, highlighting how the region’s top regulator is growing increasingly wary about a potentially circular effect of the deals.

“We are conducting a new survey with a broad set of banks to analyze practices in synthetic risk transfer financing,” Pedro Machado, a member of the ECB’s Supervisory Board, said in a speech Tuesday. That includes the provision of funding by “significant banks” to investors in SRTs originated by other banks, he said.