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BANKWATCH REVIEWS NATIONAL DEPOSITOR PREFERENCE LEGISLATION, IMPLICATIONS ON RATINGS AND RATING APPLICATIONS

 NEW YORK, Aug. 4 /PRNewswire/ -- Thomson BankWatch Inc. today released the following:
 National depositor preference legislation is expected to be passed shortly as part of the budget bill currently being hammered out in Congress. This legislation will change the liquidation hierarchy of bank creditors in liquidation - primarily impacting those non-depositor creditors who until now have been considered "senior" or general creditors. Essentially, this amendment will place the claims of all domestic depositors and the FDIC ahead of those of non-deposit securities including bank notes, bankers acceptances and federal funds. Twenty-nine states presently have a form of depositor preference incorporated into state law which applies to state-chartered banks those states.
 BankWatch does not anticipate that this legislation will have a meaningful impact on either the overall creditworthiness of the U.S. banking industry or on short-term ratings of the affected liabilities. Because the short-term rating scale used by most major bank rating agencies is limited to only four categories with only one being sub- investment grade, it is likely to be impractical to differentiate so precisely among various short-term instruments of a particular bank so as to rate deposit notes higher than bank notes, for example. There are possible rating implications for longer term instruments, largely due to the capacity of the broader long term rating scale (at least nine rating categories) to more finely differentiate among various instruments or obligations of a particular bank.
 However, the more immediate impact of this amendment is that money fund managers who must follow Rule 2a-7 of the Investment Company Act will have to determine whether the bank securities they are buying qualify as eligible securities under the new legislation.
 BankWatch has refined its short-term Rating explanation to define more clearly the obligations to which the ratings apply. BankWatch short-term Ratings now specifically apply to unsubordinated instruments including deposits, bank notes, bankers' acceptances, federal funds, letters of credit, commercial paper and other obligations comparable in priority and security to these instruments.
 BankWatch has reviewed all of its ratings, both short and long term, and does not believe that any rating changes are indicated at this time as a result of the passage of national depositor preference.
 -0- 8/4/93
 /CONTACT: Sharon Haas of Thomson BankWatch, 212-510-0315/


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WB -- NY038 -- 9302 08/04/93 10:56 EDT
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Publication:PR Newswire
Date:Aug 4, 1993
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