Standard & Poor's Ratings Services announced Tuesday that it is "requesting comments on proposed revisions to its Principal Stability Fund Ratings Criteria. The company's press release, entitled, "Comments Requested On Principal Stability Fund Criteria Revisions; Fund Ratings Definitions Updated," says, "Our proposal and the specific requests we are making are outlined in the article 'Request for Comment: Principal Stability Fund Rating Criteria,' published today on RatingsDirect. It is also available on Standard & Poor's Web site at www.standardandpoors.com." The publication summarizes S&P's proposed money fund ratings changes, seeks feedback on a series of questions , discusses the impact on ratings, and discusses methodology.
The S&P release says, "We encourage all market participants to submit comments in writing on the proposed criteria by March 26, 2010. Please e-mail your written comments to CriteriaComments@standardandpoors.com. Once the comment period is over, we will evaluate the comments and finalize the principal stability fund rating criteria. Also effective today, we have updated our principal stability fund ratings definitions on www.standardandpoors.com.... The changes have not resulted in any ratings changes to our currently rated funds. The amendments are intended to provide more transparency regarding the opinion reflected in our principal stability fund ratings definitions."
The Request for Comment says, "The past two years have made up one of the most turbulent periods in the more than 35-year history of money-market funds. In all corners of the globe, unprecedented credit and liquidity events have led to a deeper understanding of the challenges facing fixed-income funds that strive to maintain a stable or accumulating net asset value (NAV) per share. The revisions proposed in this request for comment (RFC) are intended to better account for these risks (primarily involving asset credit-quality and liquidity risks) in Standard & Poor's Ratings Services' criteria for principal stability fund ratings (PSFRs), and identify characteristics that are inconsistent with highly rated funds."
It continues, "This RFC explains the proposed criteria changes for PSFRs and, if implemented, would complement or replace our PSFR criteria published in February 2007. During the past couple of years, we have observed within our rated funds universe a wide range of approaches to managing investment risks. We are proposing the criteria changes detailed herein to better account for fund investment risks that are inconsistent with high ratings. We are requesting comments on several proposed changes to our criteria and methodologies to gather information about market perspectives that may aid in further developing the criteria. The proposed criteria revisions apply to rated funds that are domiciled in the U.S., Bermuda, Cayman Islands, Channel Islands, France, Ireland, Isle of Man, Luxembourg, the U.K., and possibly other countries."
The proposed changes include: adopting WAM to final maturity criteria (with no change in regular WAMs for AAAm funds); allowing 95% correlations to 3-month LIBOR (in addition to Fed funds) for variable/floating rate indexes; restricting maturities of illiquid securities; tweaking maximum issuer concentrations; adding weekly stress tests; and, eliminating the 'G' designation for government money funds. S&P says, "[W]e expect very little, if any, changes to outstanding ratings."
S&P says it will host a teleconference on Thursday, Jan. 14, 2010, at 11:00 a.m. EST. (The dial-in number is 1-210-795-1098; for the U.K. it is 44-20-7108-6248. The conference ID is 2850908, and the passcode is "SANDP."
