Fitch Unveils New LIBOR Deal Criteria

Fitch Ratings has announced the introduction of new model-based stress criteria for securitizations involving the U.S. dollar London interbank offered rate that it says will better capture the potential effects of basis risk.Fitch said it will solicit market feedback for one month before releasing its final criteria, after which the stresses will be updated monthly. The criteria changes are likely to have the biggest effect on consumer asset-backed securities and residential mortgage-backed securities, according to Claire Mezzanotte, a Fitch managing director. Ahmet Kocagil, a managing director in Quantitative Financial Research at Fitch, said the major advantage of the new methodology is that "the basis-risk assumptions are applied uniformly over different securitized products based on past occurrences and future projections of market interest rate dynamics." The rating agency can be found online at http://www.fitchratings.com.