Bank of America is planning a $3bn synthetic risk transfer (SRT) linked to loans extended to private equity and other private market funds, as demand for capital relief transactions accelerates across the banking sector, according to sources cited by Bloomberg.

The transaction will reference a portfolio of subscription lines, short-term credit facilities secured by the undrawn capital commitments of fund investors. These loans are used by private equity funds to manage liquidity, bridge capital calls, and enhance returns during active investment cycles.

Final terms are still being discussed with investors, according to people familiar with the matter.

SRTs enable banks to transfer default risk to institutional investors, freeing up regulatory capital and reducing exposure to concentrated sectors. Typically, lenders obtain protection for between 5% and 15% of a loan portfolio’s value through credit-linked notes sold to pension, hedge, and sovereign wealth funds.

The deal follows Bank of America’s $1bn SRT completed last year and reflects the growing trend among major global lenders to manage balance sheet exposure to private credit. Morgan Stanley is currently marketing a $6bn SRT tied to private credit loans, while Sumitomo Mitsui Banking Corp., JPMorgan, Goldman Sachs, and UBS have launched similar transactions.

According to Bloomberg Intelligence, the global SRT market is expected to expand by about 11% annually over the next two years, driven by surging demand from investors seeking yield and banks seeking capital efficiency.

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