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(Bloomberg) -- NatWest Group Plc is working on a significant risk transfer linked to a portfolio of leveraged loans, according to people with knowledge of the matter.

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The size of the reference portfolio is almost £1 billion ($1.3 billion), said the people, who asked not to be identified because the potential transaction is private. The size of the SRT is around £90 million, they added.

SRTs are an increasingly popular tool for banks to manage risk. Lenders can insure loans against default by selling these notes to pension, sovereign wealth and hedge funds. That enables them to tie up less of their own capital to meet regulatory requirements, while investors can pick up yields frequently above 10%.

The terms, including size, are still subject to discussions with investors, said the people. Separately, the bank is on Wednesday marketing a pound-denominated Additional Tier 1 bond, a kind of debt that lenders use to bolster capital buffers. A representative for NatWest declined to comment.

The rising popularity of SRTs means such deals are on track to hit a record high this year. Chorus Capital Management, which invests in SRTs, projects global issuance to grow to as much as $35 billion, compared with an estimated $29 billion last year, with the lion’s share taking place in Europe.

Last year NatWest added bankers to its SRT desk and marketed a risk transfer tied to £1.4 billion of loans. Other recent deals out of British banks include a Standard Chartered Plc transaction linked to a portfolio of $1.5 billion of loans.

The UK government is close to existing its stake in NatWest, acquired in a bailout during the 2008 financial crisis. This month it sold down more and now owns less than 7%, with the bank’s Chief Executive Officer Paul Thwaite saying that the second quarter would be a reasonable timetable for a full exit.

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