Supervisory staff is monitoring each bank's management of hedge fund counterparty
exposures as well as the bank's efforts to address any identified risk management shortcomings.
BAC) 'A+/F1+' on Rating Watch Negative, which is sufficient to support 'AAAsf' ratings as a derivative counterparty
under Fitch's counterparty
This can be achieved through what we call "stress tests," where a bank conducts "what if" analyses of how credit exposures to a single counterparty
could grow under these market conditions.
In reviewing the draft novation documents, Fitch applied its current counterparty
Criteria for Structured Finance Transactions', dated Oct.
Among the areas to be addressed are (1) the credit approval process and ongoing monitoring of credit quality, including the availability of information on counterparties and its use in making credit decisions; (2) procedures for estimating potential future credit exposures, including stress testing to gauge exposures in volatile and illiquid markets; (3) approaches to setting limits on counterparty
credit exposures; and (4) policies regarding the use of collateral to mitigate counterparty
However, under this downgrade scenario, corresponding one notch rating downgrades may take place for SF ratings directly credit-linked to a specific counterparty
absent remedial action.
Supervisors of banks and security firms must assess whether current procedures regarding stress testing and counterparty
assessment could have been improved to enable counterparties to take steps to insulate themselves better from LTCM's debacle.
The Basel Committee for Banking Supervison (BCBS) has issued a substantive package of changes to the regulatory framework around counterparty
credit risks in response to the events of the financial crisis of 2007-8.
Such facilities potentially could make management of counterparty
credit risks and liquidity risks even more effective.
CHICAGO -- Fitch Ratings was notified of the intention to change the interest rate swap, interest rate cap, cashflow swap, and basis swap counterparty
(Novation Transactions) of four structured finance CDO transactions to Barclays Bank PLC (Barclays), rated 'AA-/F1+' with a Stable Rating Outlook by Fitch, from AIG Financial Products Corp (AIG), rated 'BBB/F1' with an Evolving Outlook.
Moreover, in some cases, a dealer in financial transactions may assume responsibilities beyond the role of a mere counterparty
CHICAGO -- Fitch Ratings was notified of the intention to change the interest rate swap and basis swap counterparty
(Novation) of Commodore CDO III Ltd.