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: How to exploit the opportunities of alternative data

Alternative data is emerging as a key component of buy-side firms’ efforts to seek out new investment opportunities, for many filling the gap left by the unbundling of sell-side research from execution. By tapping into unique, non-traditional data sets, hedge funds and quantitative fund managers hope to exploit unfound opportunities before they hit the mainstream....

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

Buy AND Build: The Future of Capital Markets Technology

Buy AND Build: The Future of Capital Markets Technology London examines the latest changes and innovations in trading technology and explores how technology is being deployed to create an edge in sell side and buy side capital markets financial institutions.

GUIDE

Enterprise Data Management

The current financial crisis has highlighted that financial institutions do not have a sufficient handle on their data and has prompted many of these institutions to re-evaluate their approaches to data management. Moreover, the increased regulatory scrutiny of the financial services community during the past year has meant that data management has become a key...