The squeeze is on - The clampdown on CDO ratings

The rating agencies have faced a barrage of criticism over their role in last year's subprime meltdown. This year they have been focusing on ensuring that a repeat of the ABS problems do not occur in other segments of the structured credit market. But the response of one rating agency in the form of new, stricter corporate CDO proposals has given rise to fears that ratings methodology changes could be a hindrance, not a help, to the market. Sarfraz Thind reports

Proposals by credit rating agency Fitch Ratings to implement a new, hardline methodology for corporate collateralised debt obligation ratings, announced in February, shook the market. Following the turmoil in the asset-backed securities market over the past few months, highly strung credit market participants remain nervous about the impact a rating agency methodology change could have on other parts of the structured credit world.

The stakes are high. In its February report, Fitch estimated that