Fitch Releases New Basis-Risk Criteria

Fitch Ratings has announced the release of new basis-risk stress criteria for securitizations involving the U.S. dollar London interbank offered rate.The new criteria are expected to have the most immediate effect on consumer asset-backed securities and residential mortgage-backed securities, according to Claire Mezzanotte, an ABS managing director at Fitch. "The majority of U.S. consumer ABS transactions, including credit card receivables, student and home equity loans, are exposed to basis risk due to mismatches between the asset and liability coupon rates," Ms. Mezzanotte said. The criteria were developed in conjunction with Fitch's new interest rate stress criteria, which were published in May. Fitch said it will be updating the interest rate and basis-risk stresses each month. The report, "Basis Risk in Structured Finance Transactions: T-Bill, CP, and Prime versus USD LIBOR," can be found on Fitch's website, http://www.fitchratings.com.