Standard & Poor's completed its review of almost 1,000 European commercial mortgage-backed securities (CMBS), placing 580 CMBS tranches on negative watch. The rating agency expects to resolve most of the credit watch actions by September 30., with downgrades not largely expected to exceed two rating categories. For example, S&P considered a hypothetical 2007 vintage transaction with an original note-to-value ratio of 45% at triple-A. If that hypothetical transaction saw the note-to-value rise to more than 70% following recent market value declines, S&P said it would consider a maximum single-A rating if it rated the transaction today as a primary issuance. "In this hypothetical case, severe value corrections have adversely affected the value of the commercial real estate and could materially, in our opinion, depress workout and recovery proceeds following a loan event of default," S&P noted in a statement on the completed review. But the European market isn't alone in its CMBS woes following a worsening economy. Fitch Ratings similarly eyed recent vintages of US CMBS for potential downgrades. The 2008 through 2008 vintages of US CMBS are vulnerable to significant performance issues, given their origination at peak market conditions and weaker underwriting standards, the rating agency said in a report this week. In another example that ABS finance is a global mechanism, the British government this week detailed a plan for financial reform on what started as an unwinding of the US housing market and what became a global financial crisis. Write to Diana Golobay.