Bradford & Bingley, which shocked the market with a profit warning last week, is set to inject more cash into its main mortgage securitisation vehicle to avoid breaching its obligations.
As it also notes:
The bank has £11.1bn of mortgages in its Aire Valley master trust securitisation programme, which is triple A-rated. However, action taken by the three main rating agencies to downgrade B&B's own credit rating after its profit warning means the bank does not meet the sufficiently high rating required under the interest rate swap that it provides to the Aire Valley trust.B&B has to take action within the next 30 days and has three options. Besides injecting additional cash, it could replace itself as a counterparty with an intermediary, or bring in a guarantor, with an appropriate rating.
It's Granite all over again.
Triple A rated? Yes, I'm French and the new International Centre for Financial Regulation, lead by an S & P person is going to make sure this never happens again.
Sorry to be cynical, but I really do think it is time London realised that change has to happen. But there's no real sign of it yet.