DBRS Publishes U.S. Credit Card ABS Rating Methodology

DBRS has today released its updated methodology for rating U.S. credit card asset-backed securities (ABS). Notably, the new approach updates the modeling assumptions used for subordinated securities issued by certain highly rated sponsors. DBRS posits that sponsors maintain an abiding interest in sustaining the credit quality of the receivables backing the rated securities, as these entities expend considerable resources to originate receivables amid intense competition and also actively manage their credit card accounts to promote consistent and robust levels of excess spread.

The methodology identifies and explains the following key analytical considerations evaluated by DBRS when rating credit card ABS:

– Quality of originations and underwriting.
– Quality of servicing capabilities.
– Performance of sponsor’s credit card receivables.
– Capital structure, proposed ratings and credit enhancement.
– Cash flow scenario analysis.
– Legal structure and opinions.

As part of the rating process, both for assigning new ratings and monitoring outstanding ratings, DBRS also monitors and assesses changes in market and macroeconomic conditions and the concomitant effects on consumers, credit card industry dynamics and other exogenous events that may impact the credit quality of proposed and outstanding ratings. DBRS also assesses the impact of newly-passed laws and regulations and, accordingly, updates and publishes its methodologies in a timely manner.

Once a final rating is assigned to a security, DBRS provides monthly surveillance information for all public ratings on its website at www.dbrs.com/PAR.

The methodology providing DBRS's processes and criteria is available by clicking on the link below or contacting us at info@dbrs.com.