Standard & Poor’s is requesting comments on a proposal to incorporate credit stability as an important factor in its ratings.


The proposal is meant to align ratings with the rating agency’s perception of investors’ expectations amidst high credit volatility.


The credit stability factor would measure an issuer or security’s likelihood of experiencing significant adverse changes in credit quality under moderate stress, according to Chief Credit Officer Mark Adelson. Adelson also said the potential change would be implemented for six months.


The framework is intended to function as a limiting factor on the ratings assigned to credits that S&P believes are vulnerable to exceptionally high instability.

The change would likely not have any effect on corporate and government ratings, but would affect ratings on derivative securities including CDOs of ABS, constant-proportion debt obligations, and leveraged super-senior structures.

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