SRT under US bank capital rules
European SRT is sold into a global investor base, and a growing part of that base reads the trade against Regulation Q rather than the CRR. The two regimes reach a similar economic result by opposite methods: the EU sets tests, the US reserves discretion.
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Two architectures
The EU answer to “has enough risk moved?” is quantitative. Article 245(2) CRR gives two safe harbours — the mezzanine test, under which the originator retains no more than 50% of the risk-weighted exposure amounts of the mezzanine tranches, and the first-loss test, at no more than 20% of the first-loss tranche with evidence of commensurate transfer. The supervisor may refuse recognition even where a test is met, and may grant it where none is (Article 245(2), second subparagraph). The current review replaces both tests with a principles-based one: at least 50% of unexpected loss to third parties.
The US answer is that there is no test. The enabling provision is the Collins Amendment (Dodd-Frank § 171, 12 U.S.C. § 5371), implemented through the Federal Reserve's Regulation Q (12 CFR Part 217), the OCC's Part 3 and the FDIC's Part 324. Definitions sit at 12 CFR §§ 217.2, 3.2 and 324.2, and the requirements for credit risk mitigants at §§ 217.41(b) and 217.141 and their OCC and FDIC counterparts. Recognition is a supervisory determination made transaction by transaction.
The practical consequence is not that one regime is stricter. It is that the EU gives an originator something to model in advance and the US gives it something to negotiate. A European bank structuring to a test and a US bank structuring to a conversation will document the same trade differently.
The 2023 interpretation on directly issued CLNs
The cheapest structure is the one in which the bank issues credit linked notes directly, without a special purpose vehicle. Until 2023 it was unclear whether that form obtained capital relief under Regulation Q. The Federal Reserve's legal interpretation of 28 September 2023, issued as an FAQ to Regulation Q, confirmed that it does, and on what conditions.
It did so under an express reservation of authority. The structure stands; it does not stand finally. For a European originator marketing into US bank balance sheets, that is the single most important sentence on this page: the American counterparty's capital treatment is confirmed but revocable, and the transaction documents should say what happens if it is revoked.
Parallel provisions, side by side
| Theme | European Union | United States |
|---|---|---|
| Risk transfer | Art. 245 CRR — quantitative tests, moving to a principles-based test | Case-by-case supervisory determination under Regulation Q |
| Risk retention | Art. 6 Securitisation Regulation — 5% | Credit Risk Retention Rule, Dodd-Frank § 941, 15 U.S.C. § 78o-11, 12 CFR Part 244 — 5% |
| Transparency | Art. 7 Securitisation Regulation | Dodd-Frank § 942, 15 U.S.C. § 77o(b), 17 CFR Part 229 |
| Eligible protection | Unfunded under Art. 201 f. CRR; funded under Art. 197 ff. CRR | Credit risk mitigants under 12 CFR §§ 217.41(b), 217.141 |
| Bank investment in the vehicle | No general equivalent | Volcker Rule, 12 U.S.C. § 1851, 12 CFR Part 248 |
Where an SPV is used: the Volcker Rule
Once a special purpose vehicle is interposed, the Volcker Rule enters. It restricts banking entities from acquiring or retaining an ownership interest in, or sponsoring, a “covered fund”; the criteria are at 12 CFR § 248.10. The analysis is familiar to anyone who has structured a CLO for US distribution, and it is a reason why the directly issued note — the form the Federal Reserve addressed in 2023 — is the preferred answer where it is available.
Why this matters for a European CRE trade
Three reasons, in ascending order of practical weight.
The investor base is shared. Ten investors account for roughly 75% of all EU SRT investment (Moody's, cited by Kindt). A concentrated book of that kind is not a European book. The protection seller reading the trade may well be applying Regulation Q to its own position, and the two regimes have to be satisfied simultaneously.
Structure choice is regime-dependent. Whether the note is issued directly or through a vehicle is, in Europe, largely a question of tax, insolvency remoteness and investor preference. In the United States it is also a capital and a Volcker question. A structure that is efficient on one side of the Atlantic is not automatically efficient on the other, and the decision is taken early.
The EU is moving towards the US method. Replacing the quantitative tests with a principles-based transfer test, while preserving supervisory discretion, narrows the distance between Article 245 CRR and Regulation Q. The European supervisory conversation will start to look more like the American one — which makes the American experience of that conversation worth reading rather than a curiosity.
Last reviewed: 13 September 2026. Based on Kindt, Synthetic Risk Transfers im europäischen und US-amerikanischen Aufsichtsrecht, BKR 2025, 1119; further sources on Resources. Related: SRT, synthetic securitisation, Securitisation Regulation 2.0.