Fitch warned this week that other rating services are "overstating" the benefits of the structures on whole-business securitizations. The warning comes on the heels of a report from Moody's which carried a positive outlook for the sector.
An SEC committee hosted a panel discussion in November regarding the compensation model for rating services. The regulator hasn't made a decision on whether reforms are needed to the issuer-pays model.
Since 2006, only one rated whole business securitization has defaulted. Investors in the deals are protected by various features, including a model that isn't particularly reliant on issuer profits.
TD Bank, State Street, Northern Trust and several other banks bucked the trend and increased their ABS investment during the third quarter. But the industry's total holdings fell 1.5% from June. (Includes two data charts.)
Fitch is including environmental, social and governance relevance scores as part of its ratings of securitized products. The scores help assess sustainability and ethics though they aren’t a major factor in credit ratings.
Presidential candidate Elizabeth Warren has flagged concerns about the issuer-pays model used by credit rating agencies for securitized products. She said the SEC hasn’t done enough to address the conflicts of interest tied to the model.
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