Reflecting the continued use of derivatives as a risk management tool, Moody's Investors Service assigned counterparty ratings to 23 U.S. bank holding companies.
While the rating agency acknowledged that banks rather than holding companies book the majority of derivatives contracts, Moody's noted that these holding companies also enter derivatives transactions.
"The holding companies are very active in funding the corporation," said senior analyst Michael R. Foley. "They issue a lot of debt in all different types of currencies and frequently enter into currency or interest rate swaps in connection with their debt issuance."
Moody's said the ratings assigned to the 23 holding companies are the same as their senior debt ratings, because counterparty claims and senior debt have equal footing in U.S. bankruptcy proceedings.
This would not necessarily be the case with foreign banks and their subsidiaries.
Moody's said it intends to expand its universe of counterparty ratings to foreign banks and subsidiaries of bank holding companies that are active in the derivatives market, but had no timetable for those additional ratings.