According to Zhito Finance APP, Banco Santander (SAN.US) is one of the most active sellers of bank risks and assets in Europe, and due to the intensifying competition for private credit giants such as Apollo Global Management (APO.US) and Blackstone (BX.US), the bank is setting lower thresholds for next year.

Bank risk transfer trades are very popular.

Sergio Gamez, head of Asset Management at Banco Santander, stated that the strong demand for bank Assets creates a "positive outlook," which may allow Spain's largest bank to transfer 60 billion euros (equivalent to 63 billion dollars) of risk-weighted Assets off its balance sheet this year. Gamez indicated that by 2025, this figure could decrease to 40 billion euros.

Banco Santander significantly reduced its risk-weighted Assets.

Banco Santander's Chief Financial Officer Jose Garcia Cantera stated at an Analyst meeting earlier this month that the lower target will be more sustainable.

Gamez's Global Asset Management department is the core of the balance sheet adjustment plan, which has transformed Banco Santander into a massive seller of banking assets and credit risks. Banco Santander has been heavily utilizing Significant Risk Transfer (SRT) tools, which allow banks to transfer some risks off their balance sheets to external investors, thereby freeing up more capital for new businesses.

It is understood that SRT often yields double-digit returns and is increasingly associated with so-called blind loan pools. Since SRT is typically bilateral and private, related data is not publicly disclosed, and deal terms are closely guarded. Investors purchasing SRT may not even know the identities of the borrowers behind these loans.

These Trades are crucial for Banco Santander, as the bank's capital level has long been below that of many peers.

Morgan Stanley Analysts Alvaro Serrano and Giulia Aurora Miotto stated last month that the ability of Banco Santander to raise capital levels had been the "biggest issue" for its stock price. However, they noted that the outlook for Banco Santander has now improved, partly due to its use of SRT.

Insiders revealed that as part of the balance sheet adjustment plan, Banco Santander is currently seeking to sell mortgages valued at 0.15 billion euros (approximately 0.158 billion USD) to KKR (KKR.US). It has also been reported that Banco Santander is nearing an agreement to sell similar loans worth 0.9 billion euros to Morgan Stanley (MS.US).

Banco Santander is also collaborating with large credit investment firms that take on some of the loans issued by Banco Santander, but since they do not accept deposits, they do not face the same level of regulation.

The outlook for SRT trades faces uncertainty.

Recently, Blackstone and Apollo Global Management invested 1 billion dollars and 370 million dollars, respectively, in infrastructure loans for Banco Santander. The biggest question is how long the investor demand boom can last.

Many Other Banks are increasing their use of SRT to manage capital, and the increase in supply may ultimately force issuing banks to offer higher interest rates to investors. The European Central Bank, the highest banking regulator in Europe, plans to accelerate the approval process, which may further stimulate issuance.

S&P Global Ratings reported in November that the new bank capital rules known as "Basel III" will take effect next year, which may mean that Banks must sell more risk Assets to achieve capital relief. S&P Global Ratings noted that SRT pricing "may not be as favorable for issuers as it has been so far this year."

Another potential downside is the strengthened regulatory scrutiny, as the International Monetary Fund recently warned that SRT could create a "negative feedback loop." Some regulators are closely monitoring the connections between Banks and Non-Bank investors regarding loans and risk, especially if these transactions are funded by the credit of other Banks.

Claudia Buch, the European Central Bank's banking supervision chief, stated earlier this week: "We generally believe that securitization is a useful tool to transfer risks to places within the financial system that can better bear these risks, rather than on the banks' balance sheets. But we also need to ensure that there are no spillover effects on the banking sector."