The agency proposes supplying additional ratings on three aspects of the products: loss given default or loss severity; collateral quality assessment; and rating outlooks.
Fitch said loss severity ratings would allow investors to assess the extent to which a loss would be realised in a tranched security, which current ratings do not predict. Collateral quality measures, which it describes specifically in the context of mortgage-backed securities, would permit them to distinguish between the worth of the structure and its credit enhancements, and the strength of the underlying assets on a five-level scale. And the rating volatility score would reflect the complexity of the structure, the breadth of its underlying market and the reliability of the agency's database - all of which affect the probability of a rapid change in credit rating.
In February this year, Fitch announced a proposed overhaul of its structured product ratings that saw some products take cuts of up to 10 notches; other agencies followed suit with revised scales and methodologies in an attempt to recover the reputation they lost during the onset of the credit crisis.