Financial Times
January 4, 2012
European financials have been flouting the original terms on packaged debt deals they send to the European Central Bank to secure cash and allowing these credit ratings to slide, Fitch Ratings has warned.
The restructured deals highlight the intensified ratings pressure in the eurozone, as the slew of recent sovereign and bank downgrades feeds into structured finance transactions and even on to the ECB’s balance sheet.
Europe’s banks are able to use structured finance deals – bundles of debt such as asset-backed securities or collateralised loan obligations – as collateral to obtain financing from the ECB. The deals are known as “retained securitisations” because they are kept on the balance sheet of the issuing bank.
However, according to Fitch, some banks have been restructuring these deals, allowing them to fall from triple A but still meet the minimum collateral requirements of the ECB. The central bank requires that, outside of certain exceptions, the deals have a triple A rating when they are first created and maintain at least an A minus rating after they are issued.
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