Fitch says latest bank ratings will have “marginal effect” on secondary market

Recent Fitch Ratings actions taken on U.S. banks will have only a marginal rating impact on structured finance transactions, according to the credit rating agency. After the Federal Deposit Insurance Corp. proposed new rules in October on how it would wind down failed financial institutions under the Dodd-Frank Act, Fitch took action. Most notably, Fitch placed a negative rating watch on issuer default rating (IDR) for Bank of America (BAC) and Citigroup (C). Fitch also placed asset-backed commercial paper conduits with direct links those banks on Rating Watch Negative. But Fitch on Monday maintains that both BofA and Citi can still act as counterparties for triple-A rated structured finance transactions. Even if Fitch pulls the trigger and downgrades the long-term or short-term IDR for either bank, most transactions with exposure to BofA or Citi will not be affected. Write to Jon Prior. The author holds no relevant investments.

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