DBRS Morningstar Publishes Final Methodology on Currency Stresses for Global Structured Finance Transactions

DBRS Morningstar finalised its new “Currency Stresses for Global Structured Finance Transactions” methodology, which was published on 2 March 2020, on a request for comment basis. This methodology outlines the framework for producing foreign exchange rate stresses for use in the analysis of global structured finance transactions and covered bonds.

The methodology produces a set of stressed depreciation curves for one currency against another. The set contains one curve for each broad rating category (AAA, AA, A, BBB, BB, B, and CCC) for a given pair of currencies. Stressed appreciation curves are set to the inverse of the depreciation curves. These curves are then used in conjunction with the relevant methodologies in the analysis of a structured finance or covered bond transaction.

DBRS Morningstar received no comments during the request for comment period that ended on 2 April 2020.

The methodology is effective as of 15 April 2020.

DBRS Morningstar has determined that no ratings on a few bonds that are subject to foreign exchange rate risk are expected to change as a result of its application.

All comments received during the request for comment period have been published to the DBRS Morningstar website, except in cases where confidentiality is requested by the respondent.

Notes:
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

DBRS Morningstar methodologies are publicly available on its website www.dbrsmorningstar.com under Methodologies & Criteria.

For more information on this methodology or these industries, visit www.dbrsmorningstar.com or contact us at [email protected].