KBRA Releases Commentary – Subscription Lines: Why Are Ratings Needed?

KBRA releases a commentary exploring aspects of the subscription line market, including why this space has seen a sizable increase in ratings in recent years.

KBRA has been active in rating subscription lines/capital call facilities for over six years. The article discusses the various use cases for ratings, specifically the nuances when bank lenders request ratings for capital management purposes. In recent years, banks, mostly non-US, have come under increased scrutiny for the capital consumed by their fund finance businesses, and they are starting to be subjected to the same rigour as other forms of corporate lending.

Ratings assist with the distribution of risk in the subline space, which allows banks to recycle their capital and balance sheet capacity more effectively. Ratings also appeal to other banks outside the initial syndicate, as well as insurance companies, which may employ ratings for the calculation of capital consumption.

Click here to view the report.