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: New trends and technologies influencing post-trade digitalisation

While digital transformation of front-office functions at financial institutions is well underway, the back office is lagging, calling on firms to reassess and innovate post-trade processes. The need for change is highlighted by specific issues, including the move towards T+1 settlement and increasing regulatory scrutiny of post-trade processes, as well as broader challenges of legacy...

BLOG

Private Markets Data Opportunities Under the Microscope: Webinar Preview

As institutional asset managers accelerate their allocations into private markets, they often find themselves facing an alien landscape when it comes to data. Used to the data-driven systems that power public capital markets, investors in private markets, including private equity and private credit as well as alternatives such as property, must contend with greater opacity,...

EVENT

RegTech Summit London

Now in its 9th year, the RegTech Summit in London will bring together the RegTech ecosystem to explore how the European capital markets financial industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

A-Team Group’s Valuations Vendor Directory 2009

An indispensable guide to valuations professionals seeking providers of services in the asset valuations market. A-Team Group’s latest release in its series of directories – available for FREE download – focuses on vendors of valuations data, models and analytics. But this is not just another list of firms with their telephone numbers – you can get that...