Saving structured finance: Dealers vie for SPV replacement swaps

A few large banks are renting out their credit ratings to protect structured finance vehicles from downgrades. But it’s a complex business, and it can come at a heavy cost to the original counterparties. By Lukas Becker


Sliding credit ratings and rising funding costs are making life awkward for European banks that have traded interest rate and cross-currency swaps with the special-purpose vehicles (SPVs) used in structured finance deals. The two-step downgrade triggers written into the ratings criteria for those deals mean many swap providers now have to post collateral to insulate the vehicle against their default, while others have reached the point of no return – the second trigger level – and have to pay a

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