Tuesday, October 27, 2009

Moody's announces plans for structured ratings indicator

London, 27 October 2009 -- Moody's Investors Service has announced preliminary plans to add an indicator to its ratings of structured finance securities as early as the second quarter of 2010 in order to comply with anticipated regulatory requirements in the European Union (EU). Moody's plans to add the indicator to all outstanding structured finance securities it rates globally, as well as to new structured ratings as they are assigned, although the rating agency may phase-in implementation beginning with European-rated securities. The indicator, if applied, would only denote that the rating is on a structured finance security; it would not otherwise change the meaning of the rating.

The EU has passed regulation for credit rating agencies which includes a requirement that ratings assigned to structured instruments be differentiated from those assigned to other types of securities. Other regulatory bodies globally have likewise raised the possibility of requiring such a differentiation. The EU regulation is expected to enter into force in the fourth quarter of this year, after which the rating agencies are expected to have six to nine months to comply.

Moody's expects the indicator will take the form of an "(sf)" which would appear following the rating in all of Moody's press releases and research reports -- e.g. "Aa3 (sf)". It would also appear in a separate rating indicator field on moodys.com and in the rating agency's data products.

The indicator would apply to all structured finance securities, including asset-backed securities (ABS), asset-backed commercial paper (ABCP), residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and derivatives such as collateralized debt obligations (CDOs). Prior to implementation of the indicator, Moody's plans to publish a full list of the types of securities it considers to be structured finance instruments.

More information about the EU regulation is available at http://www.ec.europa.eu.

Moody's also said that additional modifications to its ratings may be required as a result of changing regulation in a number of jurisdictions, including the EU, and that it plans to notify the market of any such changes prior to their implementation.

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