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CVM submits several changes to performance reporting standards for ABS transactions.

New York: Comissao de Valores Mobiliarios (CVM), the Brazil's securities market regulator, submitted several changes to performance reporting standards for asset-backed securities (ABS) transactions to the public recently.

The changes lack important features and the breakdown of payment data could also lead users to continue to underestimate delinquencies and losses, Fitch Ratings says. If the changes had required more comprehensive reporting by trustees of transaction-specific performance triggers and early amortization events, they would have represented an important step toward greater transparency. Trustees already must report several performance data such as delinquencies, prepayments, repurchases and commingled collections. However, the level of detail and quality varies widely among market participants. For these reasons, Fitch does not rely on public information in its surveillance of rated transactions.

Fitch is a nationally recognized statistical rating organization (NRSRO) designated by the U.S. Securities and Exchange Commission. The changes add minor details to existing asset and liability information. However, the proposed version of Instruction 489 still lacks important features common in developed-market ABS investor reporting, such as transaction monthly statements of cash flow waterfall allocations. Also, the reported loan delinquency information only considers installments in arrears rather than the entire loan principal balance. This can lead users to underestimate ABS delinquencies and losses of the underlying pool.

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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Feb 10, 2016
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