By Zach Fuchs
Every year, the agencies roll out another classification scheme for hybrids. Fitch Ratings has finally streamlined its criteria into a five-tier Class A to E debt-equity continuum with a flat 30% cap on hybrids as a proportion of eligible capital.
On Fitch’s new continuum, Class A is pure equity, while Class E is pure debt. This is the reverse of the basket system employed by Moody’s, in which Basket A represents pure debt.
Crucially, the standards are now the same for banks and corporates. In its previous standard, the agency explained the need for a more conservative approach for bank hybrids, since a beleaguered corporate can skip a payment more easily without rattling the capital markets....
