BRD and IFC sign first synthetic significant risk transfer (SRT) transaction in Romania

BRD, the Romanian subsidiary of the French group Societe Generale, and IFC, a member of the World Bank Group, have closed a landmark synthetic significant risk transfer (SRT) transaction that will free up capital for BRD to boost the financing of impactful sustainability-related projects in Romania.

Under the transaction, IFC will provide a risk guarantee on a BRD portfolio of small and medium enterprise (SME) and corporate loans worth up to EUR 700 million. Capital freed up by the SRT will enable BRD to lend up to EUR 315 million to fund climate-related initiatives and women-owned smaller businesses.

Significant risk transfer (SRT) is a tool through which a bank buys protection against the default risk for a portion of its portfolio. Synthetic risk transfer means that the bank continues to hold the loans on its balance sheet, but the buyers of the SRT cover the losses in case some of those loans are not reimbursed. In exchange for what is, in essence, a default insurance policy, the bank pays a fee to the buyer.

SRTs are a widely used capital management tool for banks. IFC has played a key role in their introduction in emerging markets, including Central and Eastern Europe. Capital resources freed up by such transactions can be reallocated toward financing projects with strong developmental impact.

“BRD is committed to building a sustainable economy in Romania and environmental, social and governance commitments are at the heart of our strategy. We have demonstrated this in recent years by delivering growing momentum in positive impact finance. We are delighted to partner with IFC on this new agreement, which will enable us to accelerate our expansion in this important area,” said Maria Rousseva, Chief Executive Officer of BRD Groupe Societe Generale.

This transaction is part of an agreement signed in early 2024 between Societe Generale group and IFC to strengthen collaboration between the two institutions to accelerate their support for sustainable finance projects.

“This transaction marks an important milestone in our longstanding partnership with Societe Generale, showcasing our shared commitment to developing innovative financing solutions. With this SRT—a first for both IFC and BRD in Romania—we are investing in the country’s future to accelerate sustainable and inclusive economic growth,” said Makhtar Diop, IFC’s Managing Director.

The SRT is one of two key IFC deals aimed at catalyzing Romania’s green transition, boosting financial inclusion, and driving sustainable growth, announced during Diop’s first visit to the country this week.

BRD has a successful track record in sustainable finance, including investing more than EUR 800 million in sustainable financing over the last three years and organizing two climate change summits in Romania.