--- title: "Bank uses a twist on credit-linked notes for capital relief" type: "News" locale: "en" url: "https://longbridge.com/en/news/292107943.md" description: "OceanFirst Financial and 400 Capital Management launched a novel credit-linked note structure to provide $1.5 billion in capital relief for OceanFirst's residential mortgage portfolio. This first-of-its-kind rated, fund-issued transaction uses a credit default swap paired with linked notes, allowing the bank to free up regulatory capital without issuing new equity. The strategy offers a cost-effective, non-dilutive solution for banks seeking mortgage capital relief while pending Basel updates." datetime: "2026-07-08T19:41:52.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/292107943.md) - [en](https://longbridge.com/en/news/292107943.md) - [zh-HK](https://longbridge.com/zh-HK/news/292107943.md) generator: "portal-rs" --- # Bank uses a twist on credit-linked notes for capital relief OceanFirst Financial and asset manager 400 Capital Management are promoting a strategy that offers a variation on credit-linked notes regional banks have increasingly used as a means of obtaining mortgage capital relief in the U.S. market. The companies applied the structure, which 400CM said appears to be the first fund-issued, rated, significant risk-transfer transaction done in the U.S., to a $1.5 billion portfolio of residential mortgages on OceanFirst balance sheet. The structure involves the pairing of a credit default swap with linked notes. This could give domestic banks another option for freeing up regulatory capital while proposed mortgage relief from a U.S. update to Basel is pending. "The CDS execution was a cost-effective risk reduction and capital management transaction for OceanFirst," CEO Christopher Maher said in a press release. The structure's advantages for bank mortgage lenders include the fact that it allows them to free up new capital to fund loans without having to tap equity by issuing new shares or diluting existing ones, according to the two companies. 400 Capital Management was able to build a structure to do this by first creating a CDS referencing OceanFirst's mortgage portfolio to transfer risk and provide capital relief. It then sold DBRS-rated credit-linked notes that referenced the first transaction to investors. "We are providing U.S. banks with flexible, non-dilutive capital relief solutions, while creating well-structured, rated bonds that institutional investors can invest in with confidence," said Jeff Willoughby, head of residential credit strategy at 400CM. "We anticipate this structure will serve as a template for future issuance." ### Related Stocks - [OCFC.US](https://longbridge.com/en/quote/OCFC.US.md) ## Related News & Research - [BankThink Capital rules should reflect the risk mitigation of mortgage insurance](https://longbridge.com/en/news/296781114.md) - [Residential Equity Strategy Gains New Context with TYTL’s Reg D Filing](https://longbridge.com/en/news/296814197.md) - [Freddie Mac: 30-year fixed mortgage rate slips to 6.65% in weekly survey](https://longbridge.com/en/news/296516015.md) - [11:46 ETCastlelake Prices $261.3M Residential Transition Loan Securitization, Castlelake Residential Mortgage Trust 2026-RTL1](https://longbridge.com/en/news/296515088.md) - [BGF exits Mortgage Support Services stake as BetterHome Group agrees acquisition](https://longbridge.com/en/news/296462187.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**