November 29, 2012 / 2:51 PM / 5 years ago

TEXT-S&P corrects its Currency Advanced Rate Calculator tool

3 Min Read

(The following statement was released by the rating agency)
    Nov 29 - Standard & Poor's Ratings Services has become aware of, and
corrected, an error in its Currency Advanced Rate Calculator (CARC) tool. Our
ratings were unaffected by the correction. The tool is used as part of our
assessment of unhedged or partially unhedged transactions that hold assets in
one currency and issues liabilities in another. 

The CARC tool estimates a stressed currency advance rate for transactions 
which may have exposure to currency risk over time periods of less than a 
month. The error only affected a limited number of currencies and the currency 
advance rates it produced were more stressed than those CARC should have 
computed. 

We are correcting tables 10a, 10b, and 10c in the article "Counterparty Risk 
Framework Methodology And Assumptions," originally published on May 31, 2012, 
because the incorrect advance rates were also stated there. We are taking the 
opportunity to clarify some details in the criteria article, and full details 
of the changes are given in "What's Behind The Updates To The Counterparty 
Risk Criteria Framework And Related Criteria?," an article which was 
originally published on June 6, 2012, and is being republished with additional 
questions to cover the November update.

The error in CARC has now been corrected, the tables referenced above have 
been updated and no ratings are expected to be affected. 

We are also publishing a criteria article that describes how we treat exposure 
to foreign currency risk that lasts less than a month in unhedged or partially 
hedged structured finance transactions (see "Stressing Foreign Currency Risk 
In Unhedged Or Partially Hedged Structured Finance Transactions," published 
today).

RELATED CRITERIA AND RESEARCH
     -- Stressing Foreign Currency Risk In Unhedged Or Partially Hedged 
Structured Finance Transactions, Nov. 29, 2012
     -- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012
     -- What's Behind The Updates To The Counterparty Risk Criteria Framework 
And Related Criteria?, Nov. 29, 2012
     -- Credit Rating Model: Currency Advance Rate Calculator, Aug. 18, 2010.


Standard & Poor's, a part of The McGraw-Hill Companies (NYSE:MHP), is the 
world's foremost provider of credit ratings. With offices in 23 countries, 
Standard & Poor's is an important part of the world's financial infrastructure 
and has played a leading role for 150 years in providing investors with 
information and independent benchmarks for their investment and financial 
decisions. For more information, visit www.standardandpoors.com.

 (New York Ratings Team)

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