Last week in Japan, Standard & Poor's introduced its joint probability approach to bank liquidity support for ABCP conduits, allowing a duo of A-2' or A-3' rated Japanese banks to provide liquidity support at the A-1' level.
U.S. market participants are hoping this credit view is brought to the U.S. marketplace, as, in the past few years, the universe of potential A-1' rated liquidity providers has contracted substantially - the result of industry consolidation and credit deterioration.
S&P also requires that the joint providers have, individually, "survivability" assessments of at least A-'
"The refined criteria take into account the term of the ABCP, the survivability of the liquidity provider and the credit quality of the underlying assets, among other factors," S&P states in a release.
It's unclear whether or not this criteria refinement will make its way across the oceans, though at least one senior banker said he had been waiting for this development for more than a decade.
ABCP contacts at S&P were unreachable as of press time, though at a recent ABCP conference in Boca Raton, an S&P official discussed "joint probability" and the potential for this view to be introduced to the U.S. market.
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