Free regulatory capital and cut earnings-at-risk — bilateral OTC swaps for community banks.

When the Fed hiked rates in 2022–2023, banks holding long-duration fixed-rate loans and securities watched their mark-to-market values collapse. For Silicon Valley Bank, unrealized losses on AFS/HTM portfolios exceeded tangible equity — a capital impairment that, once disclosed, triggered a classic bank run. Community banks face exactly the same concentration: mortgage portfolios, fixed-rate commercial loans, and long-duration investment books are standard balance-sheet exposures. The hedge that SVB lacked was simple — an interest rate swap converting fixed-rate income to floating. Without it, a rate move is a direct hit to equity.

The four instruments in the program cover the four major community-bank exposures:

• Interest Rate Swap (IRS): pay fixed, receive SOFR. Your fixed-rate loan book nets to floating — rate spikes no longer impair equity.
• CDS/TRS (Credit Concentration): hedge credit concentration in a single industry or borrower. Structured for Significant Risk Transfer (SRT) to qualify for RWA relief — the engine certifies SRT eligibility before confirmation.
• Parametric Concentration Swap: pays if your sector HHI exceeds a threshold. No loan-by-loan disclosure required — the trigger is a published index, keeping the structure bilateral and clean.
• Hedge Perpetual: a perpetual funding-rate swap that locks duration without rolling. No maturity wall, no calendar gap, no roll basis risk.

All structures are bilateral ECP OTC swaps. No clearinghouse required for eligible contract participants under CFTC §2(h)(7).

CDS and TRS structured for Significant Risk Transfer reduce your risk-weighted assets, freeing Tier-1 capital for new lending. SRT requires that the protection genuinely transfers credit risk: no implicit support, a clean economic break, and risk transfer above the Basel threshold. The engine runs the SRT test automatically before confirming any CDS/TRS — if the structure fails, the trade is blocked and you're shown why. Passing structures are documented with a regulator-ready certification in the exam pack.

Every hedge you execute is automatically re-optimized across the platform under CFTC No-Action Letter 26-20 (Post-Trade Risk Reduction Services). Other participating banks have offsetting exposures — the fabric finds those offsets and compresses your bilateral book, freeing additional capital without new net exposure. All runs remain bilateral at all times. No mutualization. Capital freed compounds as the network grows.

The call-report and exam pack — hedge accounting documentation, SRT certifications, counterparty exposure summaries, notional schedules, and mark-to-market reconciliation — are assembled automatically from live hedge positions. No manual spreadsheet. No last-minute scramble. One click at any time produces a regulator-ready package consistent with the actual live positions.

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