Subscription lines: Why are ratings needed?
11.02.2025 – Contributors
KBRA’s Mauricio Noé details the drivers behind sub-line ratings, as well as the benefits and obstacles.
KBRA has been active in rating subscription lines/capital call facilities for over six years. Initially, credit ratings were almost exclusively used for distribution purposes, as lenders looking to reduce capital and/or risk mostly focused on selling down to US insurance companies optimising their own capital under the National Association of Insurance Commissioners’ (NAIC) Risk-Based Capital framework.
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 (which is how subscription lines are characterised from a regulatory capital perspective).