DBRS Morningstar Requests Comments on Several European Structured Finance Methodologies
ABCP, Auto, RMBSDBRS Morningstar is requesting comments on the proposed updates to the following methodologies:
-- “Rating European Structured Finance Transactions Methodology” including appendices,
-- “Rating European Trade Receivables Securitisation Transactions”,
-- “Master European Structured Finance Surveillance Methodology”,
-- “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”,
-- “European RMBS Insight Methodology” including addenda,
-- “Common RMBS Rating Methodology”,
-- “Rating European Consumer and Commercial Asset-Backed Securitisations”,
-- “European CMBS Rating and Surveillance Methodology”,
-- “Rating European Nonperforming Loans Securitisations”,
-- “Rating CLOs Backed by Loans to European SMEs”,
-- “Rating CLOs and CDOs of Large Corporate Credit”,
-- “Rating European Auto Wholesale Securitisations”,
-- “Rating European Rental Car Securitisations”, and
-- “Global Methodology for Rating and Monitoring Covered Bonds”.
The proposed changes are related to the proposed updates to Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings (Appendix C) of the “Global Methodology for Rating Sovereign Governments”. These updates are described in the press release available at www.dbrsmorningstar.com. Appendix C describes the impact of sovereign ratings on other DBRS Morningstar credit ratings, including structured finance. With respect to structured finance, DBRS Morningstar proposes to remove the application of a stress scenario regime for sovereigns rated in the “A” category or below. DBRS Morningstar has determined that macroeconomic risk for securitised assets in lower rated countries is in most cases reflected in historical data that is used in the structured finance rating analysis.
For the first three listed methodologies, this change to the “Global Methodology for Rating Sovereign Governments” would result in a change of the methodology text and the changes are deemed to be material. The above Methodologies may, upon the close of the Request for Comment period, supersede the versions published on 15 July 2022, 8 November 2022, and 7 February 2023, respectively.
For the remaining 11 European structured finance methodologies listed, the change to the “Global Methodology for Rating Sovereign Governments” would result in a changed methodology application. The current versions of these 11 methodologies are expected to remain the same.
Comments should be received on or before 23 August 2023. Please submit your comments to the following email address: sfcomments@dbrsmorningstar.com.
DBRS Morningstar deems the updates to be material and with positive rating impacts. In European structured finance, approximately 40 bonds in 21 transactions could be upgraded by one or two notches as a result. The affected transactions securitise Portuguese, Spanish and Italian assets, predominantly asset backed securities (ABS) and commercial mortgage-backed securities (CMBS).
DBRS Morningstar publishes on its website all comments received, 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/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (4 July 2023).
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.
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 info@dbrsmorningstar.com.