May 30 - The ratings assigned by Fitch to U.S. and European prime money market funds (MMFs) are unaffected following the agency’s recent action placing a number of major Japanese banks’ long-term Issuer Default Ratings (IDRs) on Rating Watch Negative.
On May 23, 2012, Fitch placed the ratings of major Japanese banks, including their Support Rating Floors, on Rating Watch Negative, following the downgrade of Japan’s sovereign Long-term Foreign and Local Currency IDRs to ‘A+', from ‘AA’ and ‘AA-’ respectively. The Rating Outlook for Japan’s IDRs is Negative. Fitch notes that the banks’ short-term IDRs and Viability Ratings were not affected by these actions.
Fitch’s MMF rating criteria relies primarily on issuers’ short-term ratings for the purposes of credit quality and diversification. As the short-term ratings are unaffected, exposures to Japanese banks remain consistent with Fitch’s MMF ratings criteria.
JAPANESE BANKS’ EXPOSURES IN RATED MMFS:
At the end of April 2012, Fitch-rated MMFs invested 8% of their assets in short-term securities issued by Japanese financial institutions and corporations. The majority of the exposures are concentrated in the three largest Japanese banks including Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho Bank, Ltd. All three banks are currently rated ‘A’, Rating Watch Negative / ‘F1’. Viability ratings, which represent Fitch’s view as to the intrinsic creditworthiness of an issuer in the absence of any external, extraordinary support, are ‘a-', ‘bbb+’ and ‘bbb-', respectively, for these three banks.