Moody's may cut Bear Stearns Financial

Moody's Investors Service said it announced that it has placed the counterparty rating of Bear Stearns Financial Products Inc. on review for possible downgrade.

The agency said that the counterparty rating is Aaa, which was given on July 20, 1996.

According to Moody's, derivative product companies are special purpose operating companies set up by leading financial institutions primarily to trade with non-affiliated counterparties in interest rate and currency swaps.

Their counterparty ratings are based on factors such as bankruptcy remoteness from their sponsor, dynamic capital and collateral requirements, insulation from market risk via mirror trades with a sponsor-affiliated entity and adherence to a set of operating guidelines that, among other things, restricts the types of products in which the DPC may transact, the agency said.

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