DBRS Updates Canadian Credit Card Cash Flow Model

DBRS has today updated the proprietary cash flow model (the Model) used for Canadian credit card securitization. The Model is effective immediately. The following key changes are incorporated in the latest version of the Model:

(1) Interest Rate Stress: In addition to the upward interest rate stress scenario described in the current DBRS Criteria for Canadian Credit Card Securitization, a downward interest rate stress scenario has been added. In the upward interest rate stress scenario, an assumption of multiples to the base forward curve (subject to a cap) is used, in addition to a stressed linear increase. The results from the most conservative of these three scenarios are then used to determine the adequacy of credit support.

(2) Interest Rate Swaps: the capability of the Model has been expanded to allow more flexibility in the modeling of interest rate swaps. In addition, the Model will analyze the position of swap payments in the transaction waterfalls more conservatively than the position most Canadian credit card transaction structures provide for.

DBRS has reviewed all the current credit card transactions in Canada based on the latest version of the Model and determined that no rating actions are warranted.