March 20, 2012 / 3:12 PM / 5 years ago

TEXT-Fitch on criteria for stressing interest rate risk in structured finance

March 20 - Link to Fitch Ratings' Report: Criteria for Interest Rate
Stresses in Structured Finance TransactionsMarch 20 - Fitch Ratings has updated its criteria for stressing interest
rate risk in existing and new structured finance transactions. The updated
criteria have also been extended to transaction cash flows indexed to interest
reference rates for Canadian Dollars (CAD). All previously published interest
rate stress levels remain unchanged.	
As envisaged under the criteria framework, Fitch has completed a review of the
interest rate bases and the defined calibration parameters that it uses as
inputs for its interest rate stress spreadsheet. The process included an
analysis of historical rate movements, a review of the economic outlook and
monetary policy regimes of each country, and an evaluation of the
appropriateness of the resultant levels of stress produced by applying the
interest rate criteria to the calibration parameters. Fitch's analysis and
criteria are based upon short-term market interest rates, namely Libor or
currency-specific equivalents. The full calibration parameters have been
published in the accompanying spreadsheet.	
The continuing historically low interest rate environment in several developed
economies, most notably North America, Europe and Japan, falls into the scope of
exceptional circumstances under these criteria. Over the next six months, Fitch
will review the economic and monetary situation of those countries and assess
the impact on its stress assumptions for interest rates. The agency aims at
publishing the results of its review in Q312.	
The updated criteria report "Criteria for Interest Rate Stresses in Structured
Finance Transactions" and accompanying spreadsheet "Fitch's Interest Rate Stress
Assumptions for Structured Finance" are available at	
Additional information is available at	
Applicable Criteria and Related Research:	
Fitch's Interest Rate Stress Assumptions for Structured Finance

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