(Bloomberg) -- Banco Santander SA is sounding out interest for potential synthetic-risk-transfer transactions linked to more than $6 billion in loans, which are tied to carmakers and other borrowers in Mexico and Brazil.

Santander Mexico, which has auto financing agreements with carmakers including Tesla Inc. and Suzuki Motor Corp., is gauging investor interest for a potential synthetic risk transfer linked to about $1.8 billion of vehicle loans, according to people familiar with the matter.

The lender is also inviting feedback for a potential synthetic-risk-transfer deal for a $4.5 billion portfolio of corporate and other business loans in the Latin American country, said the people, who asked not to be identified because the matter is private. Separately, Santander is assessing interest in a deal for a Brazilian portfolio, said the people.

The processes are all at an early stage, with no decisions made on the size or terms of the sales, said the people. 

A representative for Santander declined to comment.

SRTs, also known as significant risk transfers and credit risk transfers, are increasingly gaining traction as a way for banks to insure their loans against default by selling credit-linked notes to investors such as hedge funds. This means that lenders have to tie up less of their own capital to meet provisions set by regulators.

Typically, a bank would obtain default protection for as much as 15% of potential losses. In return, investors can receive double-digit yields on their holdings.

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In Europe, Santander is weighing an SRT for a German corporate loan portfolio, according to a person familiar with the matter, who didn’t specify names or loan sizes.

Spanish Non-Performing Loans

Last year, banks around the world sold $25 billion of SRTs, partially offloading the risk of $300 billion of loans, according to an estimate by Pemberton Asset Management. The market for synthetic risk transfers is likely to grow by around 15% globally this year, as US and European banks increasingly use this tool to fortify their balance sheets, according to AXA IM Alts estimates.

Separately, Santander is also looking to sell a Spanish portfolio of €270 million ($293 million) in mortgage arrears and €100 million of consumer and business loans which are performing again after falling into arrears, according to a person familiar with the matter.

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