Editor’s Letter

However, that hardly means that the year’s f irst half had been dull. One important development during the second quarter was S&P’s update to its criteria for rating CLOs (Ghetti et al. 2019a, 2019b; Kobylinski, Ghetti et al. 2019; Kobylinksi, O’Keefe et al. 2019; S&P Global Ratings 2019). The update somewhat relaxed the rating agency’s standards. Bloomberg identified the update as a development that could “kick off another round of rating shopping in Europe’s CLO market” (Husband 2019). Several aspects of the update are notable. First, S&P re-designated a substantial portion of its CLO methodology from being criteria to being merely “guidance” (Ghetti et al. 2019a, 2019b). The distinction is important because analysts can deviate from guidance but not from criteria (Van Acoleyen et al. 2017). Additionally, guidance can be changed or rescinded without all the procedural checks and balances that apply to criteria. Second, S&P seems to have also modified the stress scenarios used for calibrating all of its criteria across sectors. The result is a relaxation of the stress levels associated with each rating category. (S&P Global E x h i b i t 1 Structured Finance Issuance, 2019H1 vs. 2018H1