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ARC Publishes Global Structured Finance Servicers Rating Criteria

London, 30 September 2020 - ARC Ratings, S.A. (“ARC”) has published its Global Structured Finance Servicers Rating Criteria. This is an update to the criteria published on 18 September 2019. The report can be accessed at www.arcratings.com.

This report details ARC’s approach to awarding a servicer quality (“SQ”) rating to servicers supporting structured finance transactions. ARC may require a servicer to be rated as part of a structured finance transaction in order to ensure that securitised assets may be serviced efficiently and effectively. An assessment of origination and servicing practices to determine a servicer rating is particularly important for any transaction, all the more so for highly granular pools such as those backing Residential Mortgage Backed Securities. Preferably, this should be via an ARC SQ rating, to enhance our understanding of the capabilities and financial condition of the company. However, a rating from another recognised rating agency can also be relied upon and, in the case of experienced originators/servicers with high credit ratings, an unpublished operational review can suffice.

Although SQ ratings are country specific, ARC’s rating approach and methodology is similar across all jurisdictions, ARC will not develop separate methodologies for each country where servicers are rated. However, the servicer environment may differ across countries due to local customs and laws, which may require modifications to the factors analysed in the rating process. In these cases, an addendum to the methodology detailing these changes on a country basis will be included.

It should be noted that ARC’s servicer ratings are not credit ratings and, although they do include an assessment of the financial condition of the servicer as part of the review this assessment should not be regarded as the equivalent of a full credit rating.

This report should be read in conjunction with ARC’s Global Structured Finance Criteria.

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