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: Data Governance

A-Team Group editor, Sarah Underwood, is joined by Dennis Slattery of EDMworks for a Q&A session to address the following: How to implement better data governance and workflow amidst data inconsistencies and duplication, challenging regulatory demands, organisational overlaps, varied documentation standards, and other challenges. About Dennis Dennis Slattery, CEO of consulting and training firm EDMworks,...

BLOG

Encompass Updates Digital Identity Service to Eliminate Stale KYC Data

More than a decade of Know Your Customer (KYC) regulations has left financial institutions with a potential time bomb in their data systems. Outdated and legacy onboarding data has the potential not only to lead to erroneous decision making but also potentially crippling fines from compliance breaches. There are many reasons why KYC data might...

EVENT

AI in Capital Markets Summit London

Now in its 3rd year, the AI in Capital Markets Summit returns with a focus on the practicalities of onboarding AI enterprise wide for business value creation. Whilst AI offers huge potential to revolutionise capital markets operations many are struggling to move beyond pilot phase to generate substantial value from AI.

GUIDE

Enterprise Data Management, 2010 Edition

The global regulatory community has become increasingly aware of the data management challenge within financial institutions, as it struggles with its own challenge of better tracking systemic risk across financial markets. The US regulator in particular is seemingly keen to kick off a standardisation process and also wants the regulatory community to begin collecting additional...