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COVID-19 - Impact on Financial Sector - 14 May 2020


Please find below a summary of COVID-19 developments relevant to our clients; these alerts are dedicated to following up on the financial  regulators’ responses to the crisis. We have also created a COVID-19 Resource Center to offer legal and business insights as this crisis continues to evolve. We wish you and your loved ones well.

If you have any questions please feel free to contact: 

Tom Van Dyck
+32 475 90 90 91

Freya Mareels 
+32 475 25 11 50

Wim Dedecker
+32 491 36 03 99



ESMA highlights challenges for collateralised loan obligations (CLOs) credit ratings

The report gives an overview of CLO rating practices and identifies the main supervisory concerns, and medium-term risks. These include: 

  • the internal organisation of CRAs;

  • the interactions of CRAs with CLO issuers;

  • operational risks;

  • commercial influence on the rating process; and

  • the need for proper analysis of CLOs.

The report also flags the impact that COVID-19 may have on CLO methodologies. ESMA expects CRAs to continue with regular stress-testing simulations and to provide market participants with granular information on the sensitivity of CLO credit ratings to key economic variables affected by the pandemic.

The report is focused on the three main credit rating agencies (CRAs) that are active in this structured finance asset class (namely Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings), as they account for most of the market.

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