By tweaking one aspect of its methodology for rating securitizations, Moody’s Investors Service has set the stage for more downgrades of deals issued out of peripheral Eurozone countries. The agency is seeking to more fully incorporate country risk into deals, in particular folding in the rare probability of any number of extreme scenarios, such as bank collapses and currency redenomination risk.

“The biggest impact will be in Europe, where the local currency ceilings have moved,” said Neal Shah, managing director at Moody’s. “And if we see material developments across the globe we’ll have to consider how to apply the framework.”

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