July 2006
Hybrids: Fitch streamlines its hybrids classification
Simplify, simplify, simplify. Thoreau’s mantra is good advice for rating agencies when it comes to allocating equity credit.
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....
You must be a Level 2 subscriber to access this archived content.
If your subscription includes access to the archive, please log in now to view.
To gain access to this content visit the subscription page or call our hotline on +44 (0)207 779 8999.
Subscribe online now and save up to 30% on your subscription.
If you are a trialist or subscriber, please enter your username and password at the top right-hand side of euromoney.com
Subscribers to Euromoney benefit from:
Level 1:
- Online access to the past 12 months content
- Tailored RSS news feeds direct to your desktop
- News delivered directly to your mobile device or PC
- Personalised email newsfeed of 'Top stories' and 'Breaking news'
Level 2:
- Exclusive access to euromoney.com - Read the latest issue early online, search for specific developments by region or sector, interrogate the results of Euromoney's benchmark polls, and view the archive dating back to 2000
- 12 monthly issues of Euromoney magazine
- More than 30 specialist research guides free
- The results of Euromoney’s polls and surveys
- Tailored RSS news feeds direct to your desktop
- News delivered directly to your mobile device or PC
- Personalised email newsfeed of 'Top stories' and 'Breaking news'
Click here to subscribe