DBRS Publishes Legal Criteria for European Structured Finance Transactions

DBRS has today published its finalised legal criteria for European structured finance transactions. The methodology provides greater transparency to the ratings process by outlining to market participants the principal legal criteria DBRS applies when rating a structured finance or structured credit transaction. Included within the methodology are country-specific addenda that set out certain specific considerations applicable to structured finance transactions in the respective country. The countries included are:

•United Kingdom
•Netherlands
•Spain
•Italy
•Portugal
•France
•Germany
•Ireland

The final methodology does not contain any substantive changes from the proposed legal criteria for European structured finance transactions with the exception of DBRS account bank criteria.

For securitisations where the highest debt obligation is rated “AAA” and 1) DBRS considers that exposure to the institution holding an account in the transaction is limited to amounts consistent with typical reserve funds or periodic payments and 2) default of the institution will not necessarily result in a failure by the SPV to meet a rated payment obligation, a DBRS rating or internal assessment of “A”, combined with a provision in the transaction legal documents to transfer the account to an eligible institution within 30 calendar days of a downgrade below that level, is generally sufficient to mitigate the risk of that counterparty’s default such that that risk may not need to be specifically modeled. The previously published request for comments referred to a rating threshold of R-2 (high) or a DBRS long-term equivalent rating.

DBRS has reviewed all of our outstanding European structured finance transactions and all transactions currently have an account bank provider that meets DBRS updated crtieria. As a result, DBRS is not taking rating actions based upon this change.

DBRS criteria and methodologies are publicly available on its website www.dbrs.com under Methodologies.