March 12, 2024

Stuart M. Litwin, Esq.

Mayer Brown LLP

71 South Wacker Drive

Chicago, Illinois 60606

Dear Mr. Litwin:

This is in response to your letter dated February 1, 2024, to the Board on 

behalf of Truist Financial Corporation (“Truist”), the parent of state nonmember bank 

Truist Bank, both of Charlotte, North Carolina, requesting relief under the Board’s 

Regulation Q (the “capital rule”).1 Specifically, Truist requests authorization to treat the 

proposed transaction by Truist Bank named “Truist Bank Auto Credit Linked Notes, 

Series 2024-1” (the “CLN transaction”) as a synthetic securitization for purposes of 

calculating Truist’s risk-weighted assets under the capital rule.

In the CLN transaction, Truist Bank intends to issue debt obligations as

early as , the principal and interest payments on which are calculated based 

on the performance of a pool of loans held by Truist Bank. Specifically, payments on the 

obligations would be calculated as if a financial guarantee were in place. Truist Bank

would receive cash from purchasers in consideration for the issuance of these debt 

obligations.

To be a securitization exposure under the capital rule, an exposure must 

arise from or reference a “traditional securitization” or a “synthetic securitization,” as

defined in the capital rule.2 If the transaction meets certain operational criteria, a Boardregulated institution may, in the case of a traditional securitization, exclude the 

underlying exposures from the calculation of its risk-weighted assets or, in the case of a 

synthetic securitization, recognize for risk-based capital purposes the use of a credit risk 

mitigant to hedge the underlying exposures.3 A Board-regulated institution that meets 

these conditions must hold risk-based capital against any credit risk of the exposures it 

1 12 CFR part 217.

2 12 CFR 217.2 s.vv. securitization exposure, synthetic securitization, traditional 

securitization.

3 12 CFR 217.41(a) and (b); .141(a) and (b).
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retains in connection with the securitization.4 Truist requests that the Board permit it to 

compute its risk-weighted asset amount under the capital rule as if the CLN transaction 

were a synthetic securitization that met the operational criteria for synthetic 

securitizations.

For a transaction to be a synthetic securitization under the capital rule, at 

least a portion of the credit risk of one or more underlying exposures must be transferred 

to one or more third parties through the use of one or more “credit derivatives” or

“guarantees,” as defined in the capital rule.5 Moreover, to meet the operational criteria 

for a synthetic securitization, a Board-regulated institution must use a qualifying credit 

risk mitigant in the form of “financial collateral,” a guarantee that meets certain 

requirements, or a credit derivative that meets certain requirements.6 Truist has not 

demonstrated that the CLN transaction would satisfy each of these elements of the capital 

rule.

Under the CLN transaction, as represented by Truist, a portion of the 

credit risk of the underlying exposures would be transferred to the obligation holders by 

use of contractual provisions that, in the opinion of counsel of Truist, would create an 

enforceable obligation on those holders to absorb credit losses. In addition, Truist Bank

would receive the value of the purchased credit protection at issuance in the form of cash 

proceeds; the proceeds would serve to mitigate credit risk of the protection providers.

The amount of cash that Truist Bank would owe to the obligation holders would depend

on the credit performance of the pool of reference assets. Thus, the credit protection 

would be pre-funded rather than backed by collateral. Truist contends that the CLN

transaction would meet all other definitional requirements and operational criteria for 

synthetic securitizations under the capital rule. It is expected that the risk weight 

produced under the securitization framework under the capital rule would be 

commensurate with the risk of the exposures that arise from the transaction if the CLN 

transaction as represented by Truist were treated as a synthetic securitization that meets

the operational criteria for a synthetic securitization.

Based on all the facts of record, the Director of the Division of 

Supervision and Regulation, acting pursuant to section 217.1(d)(3) of the capital rule

under authority delegated by the Board,7 and after consultation with the General Counsel,

has determined that Truist may calculate its risk-weighted asset amount under the capital 

rule as if the CLN transaction were a synthetic securitization that met all the operational 

criteria for a synthetic securitization. This action also permits Truist to treat other creditlinked-note transactions as synthetic securitizations for purposes of calculating riskweighted assets under the capital rule, so long as any such other credit-linked-note

transactions are structured and documented in a substantially identical manner to the

4 Id.

5 12 CFR 217.2 s.vv. credit derivative, guarantee, synthetic securitization.

6 12 CFR 217.41(b)(1); .141(b)(1); see also 12 CFR 217.2 s.vv. eligible credit derivative, 

eligible guarantee, financial collateral.

7 12 CFR 265.7(k)(1)(ii)(C).
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CLN transaction and do not deviate from the definitional requirements and operational 

criteria for synthetic securitizations in the capital rule other than with respect to the use of 

a “guarantee” and the presence of a qualifying credit risk mitigant. In addition, this 

action applies only to the CLN transaction and other substantially identical CLN

transactions up to an aggregate outstanding reference portfolio principal amount of the

lower of 100 percent of Truist’s total capital or $20 billion. Truist may not apply this 

treatment to less than the entirety of all the exposures arising out of any given CLN 

transaction.

This action is based on the specific facts and representations in the request 

and in communications with Board staff, as well as any commitments provided by Truist.

Any change in these facts or representations should be communicated immediately to 

Board staff and could result in a different conclusion. This action also is limited to this 

transaction and like transactions as described above and does not apply to any other 

transaction. 

Very truly yours,

(Signed) Michele Taylor Fennell 

Michele Taylor Fennell

Deputy Associate Secretary of the Board