DBRS Morningstar Publishes Final Derivative Criteria for European Structured Finance Transactions

DBRS Morningstar finalised its “Derivative Criteria for European Structured Finance Transactions” (the Methodology).

This Methodology presents the criteria by which DBRS Morningstar analyses counterparty risk and its mitigation in relation to derivatives arrangements that are part of European structured finance transactions.

The Methodology supersedes the prior version published on 20 September 2021 and is effective as of 16 June 2023.

The changes relate to the increase in volatility cushions in the context of collateral posting at the first rating threshold for cross-currency swaps, following a review of historical currency exchange-rate volatilities. DBRS Morningstar rates one European covered bond programme and four European asset-backed security transactions with a currency swap considered in the analysis. No outstanding ratings are expected to be affected as result of the changes and, hence, there is no rating impact.

No comments were received during the request for comment (RFC) period. All comments received during the RFC 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 can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/396929.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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

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