Fitch Updates Structured Finance Rating Caps and Limitations Criteria; No Rating Impact

Fitch Ratings-New York/London-16 June 2016

Fitch Ratings has updated its "Criteria for Rating Caps and Limitations in Global Structured Finance Transactions". The update does not contain any material changes and will not have any impact on ratings for existing structured finance (SF) transactions.

The report details factors that may result in a cap being applied when assigning an SF rating in certain circumstances. It also explains some limitations to SF ratings, including characteristics that may mean the assignment of a rating is not possible. Factors that could lead to rating caps or limitations include limited portfolio and data quality, asset concentration and performance volatility, certain legal terms and conditions, excessive market value exposure, sovereign dependence, third-party dependence and issues with incentives for transaction parties.

The updated version of the criteria includes clarification on the scope of the criteria, Fitch's use of proxy information if specific loan-by-loan information is not available and the conditions under which Fitch is likely to assign 'Asf' or 'BBBsf' ratings to bonds for which interest deferral is expected.

The principles discussed in the criteria are applicable to all asset classes including residential and commercial mortgage-backed securities, asset-backed securities and structured credit transactions. The criteria provide an overarching framework applicable to all SF transactions, which is complemented by asset class-specific and cross-sector rating criteria.

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The updated criteria report replaces the report of the same name dated 28 May 2014.

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