News
ARC Publishes Updated Global Structured Finance Methodology
30-09-2020

London, 30 September 2020 – ARC Ratings, S.A. (‘ARC’) has today published an update to its Global Structured Finance Methodology (the Methodology’). This is an update to the methodology published in 2019; however there are no significant amendments and therefore no rating impact.


The Methodology sets out a framework for the rating of any Structured Finance transaction rated by ARC. Structured Finance transactions include all forms of asset backed securities, for example, transactions backed by: residential and/or commercial mortgage loans, car loans and leases, consumer loans, equipment leases and corporate loans. The Methodology is complemented by asset class specific criteria that are published by ARC and updated over time. The asset class specific criteria disclose any additional details including the derivation of assumptions relevant to the specific asset class. The methodology also allows the rating of ‘one-off’ transactions not covered by any asset specific criteria.


The main areas of attention when rating a Structured Finance transaction include the transaction’s legal structure; the historical and expected performance of the underlying assets; potential counterparty risks; the history of and the extent of reliance on the originator and servicer; a stressed cash-flow analysis of the assets and liabilities, as necessary. The analytical process is concluded by a rating panel consisting of a quorum of at least five analytical staff, including a member of the quorum who is independent of the Structured Finance rating team, which panel will determine the rating to be assigned.


The methodology can be accessed at www.arcratings.com.

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