Fitch on National Scales for MMF Ratings
Fitch Ratings "updated its national scale criteria for rating money market funds (MMFs), consistent with its practice of reviewing ratings criteria on an annual basis." Their release says, "The report applies to assigning national scale ratings to constant net asset value (CNAV) and certain variable net asset value (VNAV) MMFs in certain national jurisdictions. It should be read in conjunction with the master rating criteria report, Global Money Market Fund Rating Criteria, published on 26 March 2013 at www.fitchratings.com." The piece explains, "Fitch typically assigns National MMF Ratings to local-currency funds regulated in countries rated below 'AAA' and where investors and investments are largely domestic. It is important to note that each National Rating scale is unique and is defined to serve the needs of the local market in question. The changes in Fitch's updated criteria are limited, and include: Exclusion of 'F3(xxx)' rated issuers as eligible investment for 'AAmmf(xxx)' rated national scale MMFs. A shortening of the maximum asset maturity for floating rate and highly liquid sovereign securities for funds consistent with a 'AAAmmf(xxx)' rating to a maximum of two years (from a previous maximum of two to three years). Fitch expectations regarding the managers' capacity for regular stress testing of portfolios with respect to redemption activity, interest rate and spread risk. `Further detail on how Fitch treats deviations from criteria, as well as clarification of Fitch's treatment of assets on Rating Watch Negative for purposes of portfolio stress testing. [And] Clarification that imposing redemption gates, even if permissible under an MMF's offering documents, would be outside investors' expectations for highly rated MMFs and typically would result in a lower rating by Fitch. Fitch does not expect any ratings changes to its portfolio of rated MMFs."
