Fitch Updates MMF Rating Criteria
A release entitled, "Fitch Updates Global Money Market Fund Rating Criteria," explains, "Fitch Ratings has updated its global criteria for rating money market funds (MMFs) and other cash management vehicles. The review is part of our normal criteria review process. No rating changes are expected. Previous versions of the criteria have been retired. The criteria remain 'principles-based' focusing on the ability of MMFs and other liquidity management products to preserve principle and maintain liquidity through managing credit, market and liquidity risks. Since the focus is on key portfolio risk attributes, the criteria is applicable to constant net asset value (CNAV) funds, variable NAV (VNAV) funds, as well as the European Union's recently proposed Low Volatility NAV (LVNAV) funds, provided the portfolio risk attributes align with Fitch's criteria." (See Fitch's new "Global Money Market Fund Rating Criteria" here.) The release explains, "Changes to the criteria include: Clarification with respect to agency exposures, i.e. Federal Home Loan Banks et. al. Specifically, all exposures above the 35% concentration threshold should have a maximum maturity of 90 days or less; Reference to Fitch's Derivative Counterparty Ratings assigned to banks, where relevant; More detailed language on Fitch's approach for unrated repo counterparties; The addition of French, U.K. and Dutch sovereign bonds as eligible repo collateral, subject to normal counterparty ratings and overcollateralization criteria; Agency securities must be denominated in the fund's base currency to be eligible to portfolio weekly liquidity, on top of previously-defined features; Clarifications on derivatives usage, defining maximum aggregate derivative risk exposure and subject to unhedged weighted average maturity (WAM) being in line with maximum WAM levels set in the criteria; Addition of a section detailing the approach for determining whether public sector entities qualify as government agencies under the criteria; and, Consolidation of national scale MMF rating criteria into the global MMF rating criteria."
