About a-team Marketing Services
The knowledge platform for the financial technology industry
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 Transformation of Buy-Side Market Surveillance

Asset managers, hedge funds, insurance firms, and other buy-side firms globally are becoming more active in their approach to market surveillance, as regulatory pressure to up their game mounts. Buy-side firms are now building out their surveillance infrastructure as they seek to respond to the requirements posed by Dodd-Frank, MiFID II and the Market Abuse...

BLOG

ace Seeks to Disrupt the Very Idea of ‘Digital’ for Financial Institutions

For more than a decade, financial institutions have been told to go digital. Data strategies have been written, platforms migrated to the cloud, and front-end experiences wrapped in slick apps. But for Niamh Kingsley, founder of ace, that conversation is already out of date. Her new firm, launched in November as a specialist post-digital advisory...

EVENT

Eagle Alpha Alternative Data Conference, London, hosted by A-Team Group

Now in its 8th year, the Eagle Alpha Alternative Data Conference managed by A-Team Group, is the premier content forum and networking event for investment firms and hedge funds.

GUIDE

Entity Data Management Handbook – Second Edition

Entity data management is this year’s hot topic as financial firms focus on entity data to gain a better understanding of customers, improve risk management and meet regulatory compliance requirements. Data management programmes that enrich the Legal Entity Identifier with hierarchy data and links to other datasets can also add real value, including new business...