DBRS Publishes Updated Methodology for Assessing European SF Servicers

DBRS has today published an updated version of the operational risk methodology for reviewing and assessing servicers in European Structured Finance (ESF) transactions. The updated report entitled “Operational Risk Assessment for European Structured Finance Servicers” covers residential mortgage-back securities, asset-backed securities, small- and medium-sized enterprises and covered bonds asset classes.

In this methodology, DBRS outlines its procedures used to evaluate the quality of the parties that service or conduct back-up servicing on the loans (or leases as applicable) included in securitised transactions rated by DBRS. While DBRS does not assign formal ratings to these processes, it does conduct operational risk reviews to assess a company’s servicing capabilities and incorporates the results of the review into the rating process for new transactions and into the surveillance process for outstanding transactions rated by DBRS. In cases where DBRS believes a servicer is unable to effectively manage the assets within a specific transaction and/or there are limited mitigating factors surrounding the identified operational risk, DBRS may refuse to rate the deal.

Changes to this methodology relate to the expansion and clarification of DBRS’s view regarding back-up servicing and the importance of ensuring the continuity of servicing throughout the life of an ESF transaction. The revisions have not resulted in any change in DBRS’s approach or opinion on the sector and, as such, the update of this methodology has not resulted in any rating changes or rating actions.

DBRS criteria and methodologies are publicly available on its website, www.dbrs.com, under Methodologies.

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.