Asset-backed securitisation and financial stability: the downgrading delay effect

Do rating models embody correctly the impact of macroeconomic variables on debtors’ solvency, determining a lag in downgrading? In pre-crisis periods, when interest rates increases are recorded as well as decreases in real growth rates, rating assessments fail to register risk increases in Abss securities, proceeding to downgrade only later, when macroeconomic variables have generated negative effects on Abs flow of funds. In such periods, agencies delayed downmarking, announcing them only after the crisis had taken place and the transaction criticalities were already displayed