Downgraded banks struggle to find replacement swap counterparties on ABS deals

A number of downgraded banks are required to find swap counterparty replacements for over 300 structured finance transactions – but this is proving difficult, with few candidates willing or able to step in


Downgraded banks are struggling to find replacement swap counterparties for hundreds of residential mortgage-backed securities (RMBS) and asset-backed securities (ABS) transactions – something that could lead to the structured finance trades themselves being downgraded.

According to data released by Moody's Investors Service last week, 165 RMBS and 144 ABS transactions have breached second-level triggers due to downgrades of their swap counterparties. In most cases, these are Spanish and Italian

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