CEC Loan Participations
on CEC LoanSource
Scalable, capital-efficient solution enabling U.S. banks—from regional institutions to GSIBs—to improve regulatory outcomes and financial returns by transferring portions of individual loan credit risk via cash-collateralized CEC Loan Participations (CECs) to private credit investors seeking new channels of efficient loan origination.
01
CEC LoanSource
CECs are a New Form of Patent Pending Loan Participation Documented by the CEC-X Master Loan Participation Agreement© and Listed on CEC LoanSource.
02
Banks Using CECs
Banks stapling CECs to individual loans free up regulatory capital and increase lending capacity, gain CET1 relief, and preserve / enhance customer relationships.
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Investors Using CECs
Private Credit Investors obtain exclusive, risk-mitigated yield opportunities from CEC Loan Participations, featuring premium investment-grade returns with favorable treatment under GAAP and statutory accounting standards.
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Borrowers Benefit from CECs
Borrowers gain deeper access to affordable credit despite bank capital constraints.
WHY CEC LoanSource?
Better Loan Participations
are Our Focus
The CEC opportunity sits at the intersection of tightening bank regulations, banks' resulting search for capital relief, and private capital's $1.7 trillion growth trajectory.
01
Banks Under Pressure
Smaller regionals to large GSIB banks face CET1 headwinds from Basel bank regulations, loan concentration rules, and regulatory scrutiny of CRE/leveraged lending.
02
Capital Relief Demand
US banks hold >$3T in CRE and corporate loans on balance sheets; associated capital constraints are limiting new origination.
03
Private Credit Growth
>$1.7T AUM, with large managers raising dedicated vehicles for IG and quasi-IG assets. Yet little access to IG bank credit risk. Most private credit is higher-yielding but also higher-risk.
Mechanics of How CECs Work
Yield
Investors earn coupon (SOFR + spread) as % of underlying loan interest rate.
Bank retains super-senior tranche to align incentives.
Loan Selection
As an Example,
Bank lists $5B of commercial mortgages and $2B of C&I loans on LoanSource for Investor to Select INDIVIDUAL loan exposures.
Agreement
CEC Loan Participation Agreement written to shift credit risk for banks and be treated as a loan participation for insurance investors on INDIVIDUAL loan exposures.
Funding
Credit investors fund cash collateral into bank deposit account as Capital Reserves.
Collateral posted to bank earns interest or lowers bank cost of deposits.