DBRS Announces Plans to Adopt a Global Structured Finance Modifier

As a global credit rating agency (CRA), DBRS has implemented a variety of initiatives to enhance the transparency and disclosure of its ratings to reflect the evolving global regulatory environment and best practices.

The International Organization of Securities Commissions (IOSCO) Code of Conduct Fundamentals for CRAs (IOSCO Code) requires that structured finance (SF) ratings be differentiated from corporate bond ratings, preferably through a different rating symbology.* The European Union (EU) Regulation for CRAs (EU CRA Regulation), which came into effect in December 2009, also requires SF instruments to be clearly differentiated by adding an appropriate symbol or modifier to the rating category.** DBRS plans to apply for registration under the EU CRA Regulation by the end of summer 2010.

Presently, DBRS press releases specify the type of rating being published, such as whether it is an SF rating, a Financial Institutions rating or a Public Finance rating (the PR Notation). By August 31, 2010, DBRS plans to implement, on a global basis, the EU CRA Regulation requirement for the SF modifier after which the PR Notation on all DBRS press releases will no longer be used.

For its SF modifier, DBRS will use the symbol “(sf)” next to the rating category for ratings that meet the requested criteria in its public press releases and rating reports. The “(sf)” symbol will only indicate that the security is an SF instrument and will not change the meaning or definition of the rating in any other way nor will it change the risk of any particular SF instrument. DBRS’s expectation of the performance of each rated SF instrument is not adjusted in any way by the SF modifier.

DBRS plans to mark the ratings of the following SF instruments with the SF modifier:
• Asset-backed securities (ABS).
• Asset-backed commercial paper (ABCP).
• Residential mortgage-backed securities (RMBS).
• Single- and multi-tranched collateralized debt obligations (CDOs) and credit default swaps (CDSs), with the exception of single-name CDSs.
• Commercial mortgage-backed securities (CMBS).
• Multi-tranched insurance securitizations.
• Structured investment vehicles (SIVs).
• Repackaged instruments where any of the underlying assets is a SF instrument.

DBRS will publish a press release to update the market when the adoption date has been finalized.

DBRS has its headquarters in Toronto, with offices in New York, Chicago and London, and covers entities worldwide.

Notes:
* Refer to Provision 3.5.b Transparency and Timeliness of Ratings Disclosure in the IOSCO Code, May 2008.
** Refer to Paragraph (40) and Article 3 Definitions in the EU CRA Regulation 1060/2009.

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