About a-team Marketing Services
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Fitch Ratings and S&P to Consider Counterparty Risk Measurement Changes

Subscribe to our newsletter

Ahead of the Securities and Exchange Commission (SEC) roundtable on the 15 April, Standard & Poor’s and Fitch Ratings have both indicated that they are considering changes to the way they assess counterparty risks for certain structured products. The SEC is due to scrutinise the practices of the ratings agencies later this month and is likely to come down hard on what it sees as failures to adequately assess risk.

Accordingly, the ratings agencies due to participate in the roundtable have been keen to steal a march on the regulator and implement some changes prior to the event. Fitch is currently seeking comment from the industry about its proposals for asset backed securities in particular, which would require counterparties to put up more collateral against losses and therefore prevent lower rated institutions from taking on the role.

Under the proposals, counterparties would be required to set aside cash throughout the lifetime of an asset backed bond to cover the potential cost of finding a replacement. These counterparties may also need to attain the highest credit ratings or gain government backing, the proposals suggest.

The firm is keen to engage in a “dialogue with the market” about these proposals, which will drastically reduce the number of eligible counterparties for these products, according to Stuart Jennings, managing director in the European structured finance group at Fitch Ratings in London. Fitch has asked for feedback to its proposals this month, after which time it will publish its final requirements.

Fitch has indicated it may also extend its counterparty risk requirements for covered bonds in line with the requirements for asset backed securities.

S&P is engaged in a similar endeavour, although it has thus far only announced an assessment of counterparty risk for asset backed securities. The review period began in October last year.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: The Data Office at a Crossroads — AI Governance, Organisational Design, and the Evolving Mandate of the CDO

Who owns AI governance in a capital markets firm – and is the Data Office structured to bear that weight? These questions sit at the heart of A-Team Research’s latest findings, presented here for the first time: the combined results of two landmark surveys examining the role of the Data Office in AI governance and...

BLOG

MSCI’s First Street Acquisition to Fill Climate Risk Gap for Investors

Data, ratings and analytics giant MSCI is betting its latest acquisition will enable investors to close the gap between perceived climate risks to their physical assets and disclosures about the impacts that severe weather is actually having on them. First Street’s global data feeds use environmental, geospatial and satellite technology to detail the vulnerabilities of...

EVENT

Digital Assets & Tokenisation Briefing, New York

A-Team Group’s Digital Assets & Tokenisation Briefing assembles an exclusive group of CxOs and senior technology innovators. These leading market practitioners and infrastructure providers are collectively building the digital rails and decentralised networks that will power Wall Street 2.0.

GUIDE

Practical Applications of the Global LEI – Client On-Boarding and Beyond

The time for talking is over. The time for action is now. A bit melodramatic, perhaps, but given last month’s official launch of the global legal entity identifier (LEI) standard, practitioners are rolling up their sleeves and getting on with figuring out how to incorporate the new identifier into their customer and entity data infrastructures....