Bail-in divisions put bank swap ratings in doubt

Europe's fragmented resolution rules threaten Moody's framework

ecb-web-2015
ECB: September legal opinion further muddied the waters

When Moody's Investors Service introduced a specific ratings framework for derivatives liabilities in March, many lower-rated banks rejoiced. The rating agency said banks' derivatives liabilities are unlikely to be used to recapitalise a failing institution, and that regulators will instead choose to use up its stock of senior bonds instead.

It used this assumption to rate these derivatives exposures higher than the bank's senior unsecured debt – in many cases by up to two notches. This meant

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here