Credit Market Research 


Global  Special Report 

The Credit Outlook Sovereign Debt 
Worries Cloud Fragile Economic Recovery 
Summary 
The worst of the most severe recession since the 1930s is fading — stabilisation is occurring and a slow recovery is in progress. Following the financial crisis‐induced recession, the many aggressive fiscal and monetary efforts by governments around the world appear to have been successful in kick‐starting economic activity. Fitch Ratings believes the turning point for the world economy was reached in mid‐2009, and the agency has revised upwards its forecasts for growth in the major advanced economies to 1.9% for 2010. Ratings are stabilising across all sectors, apart from in structured finance and high‐grade sovereigns. However, the economic recovery is fragile, and needs to move on to a self‐ sustaining phase. The recovery has been driven by temporary factors — the rebound in world trade, a slowdown in inventory de‐stocking, and fiscal policy easing. The necessary trigger of increased investment is hampered by the continued deleveraging, constrained credit availability, and uncertain labour market prospects affecting the consumer and housing segments, although prospects for a pick‐up in private investment — especially in the US — are brighter. The corporate sector is struggling with stubbornly high over‐capacity, which acts as a disincentive for capex. In the public sector, which has shouldered much of the financial burden of the problems in the private sector, large budget deficits are forcing policy back into restraint mode (Government Debt/GDP chart), and placing increasing pressure on high‐grade sovereign creditworthiness. Across Fitch’s rated universe, the developed market base‐case assumption is for slow and anaemic recovery. Hence, the single most significant risk to ratings is a “double‐dip” recession. This could be triggered by the upcoming fiscal tightening cycle which will be the greatest in history. However, Fitch expects its effect on growth to be delayed due to lags in the economy.
Government Debt/GDP
(%) 120 100 Mature economies EM

Analysts 
Monica Insoll +44 20 7417 4281 monica.insoll@fitchratings.com Mariarosa Verde +1 212 908 0791 mariarosa.verde@fitchratings.com Trevor Pitman +44 20 7417 4280 trevor.pitman@fitchratings.com Group Credit Officers Gerry Rawcliffe (Sovereign; Public Finance and Financial Institutions – EMEA & APAC) +44 20 7417 7419 gerry.rawcliffe@fitchratings.com Eric Friedland (Public Finance ‐ US) +1 212 308 0632 eric.friedland@fithcratings.com Joo‐Yung Lee (Financial Institutions ‐ US) +1 212 908 0560 joo‐yung.lee@fitchratings.com Eileen Fahey (Regional Credit Officer– US) +1 312 368 5468 eileen.fahey@fitchratings.com Andrew Murray (Insurance – EMEA & APAC) +44 20 7417 4303 andrew.murray@fitchratings.com John Hatton (Corporate ‐ EMEA & APAC) +44 20 7417 4283 john.hatton@fitchratings.com Timothy Greening (Corporate ‐ US) +1 312 368 3205 timothy.greening@fitchratings.com Glenn Costello (Structured Finance) +1 212 908 0307 glenn.costello@fitchratings.com Stuart Jennings (Structured Finance ‐ EMEA) +44 20 4717 6271 stuart.jennings@fitchratings.com Thomas McCormick (Global Infrastructure and Project Finance) +1 212 908 0235 thomas.mccormick@fitchratings.com

80 60 40 20 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 (Year) Source: Fitch  2004 2005 2006 2007 2008 2009e 2010f 2011f

www.fitchratings.com 

18 May 2010 

Credit Market Research
Outlooks Overview 
Negative Outlooks
Banks (% of portfolio) 70 60 50 40 30 20 10 0 Q307 Q407 Q108 Q208 Q308 Q408 (Quarter/year) Source: Fitch Q109 Q209 Q309 Q409 Q110 Insurance Corporates SF Sovereign Aggregate ex. SF

Outlooks have been stabilising across most sectors since Q309. In structured finance, the continued negative trend is driven mainly by US RMBS and, to a lesser extent, US CMBS. The insurance sector outlooks have started to stabilise after a significant increase in the proportion of negative outlooks from 2008. The negative outlooks broadly reflect the relatively high level of insurers’ exposure to volatile investment markets and uncertain economic conditions, as well as the absence of expected government support as a stabilising factor (compared with financial institutions). 

Sovereign Overview 
Sovereign Negative Outlooks
(% of portfolio) 30 25 20 15 10 5 0 Q307 Q407 Q108 Q208 Q308 Q408 (Quarter/year) Source: Fitch Q109 Q209 Q309 Q409 Q110 Developed markets Emerging markets All

Outlook Trend
· For high‐grade sovereigns, the broad outlook is negative for credit and ratings · Emerging market sovereign credit quality will continue to improve

Key Risks
· Failure to articulate credible fiscal consolidation programmes threatens financial stability · “Confidence shocks” that undermine access to long‐term and affordable fiscal funding · Uncertain prospects, especially for highly‐ leveraged economies, compound the fiscal challenges · Persistent global imbalances pose a risk to sustained economic recovery

The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic Recovery May 2010 

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Public Finance Overview 
Key Risks
· · · · · Weaker fiscal revenues High capex to boost employment Rising deficits, including current balance Increased debt and refinancing needs Immigration and ageing population placing pressure on current expenditure 

Financial Institutions Overview 
Financial Institutions Negative Outlooks
(% of portfolio) 60 50 40 30 20 10 0 Q307 Q407 Q108 Q208 Q308 Q408 (Quarter/year) Source: Fitch Q109 Q209 Q309 Q409 Q110 EMEA North America EM All

Outlook Trend
· Global rating outlooks for financial institutions should achieve further stabilisation in 2010

Key Risks
· Further asset quality deterioration, including asset bubbles in Asia · Refinancing/market access · Profitability and liquidity · Adverse regulatory developments · Sovereign credit profile pressure 

Insurance Overview 
Insurance Negative Outlooks
(% of portfolio) 70 60 50 40 30 20 10 0 Q307 Q407 Q108 Q208 Q308 Q408 (Quarter/year) Source: Fitch Q109 Q209 Q309 Q409 Q110 EMEA North America All

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Outlook Trend
· Sectors moving towards stabilisation as capital market conditions improve · Operating fundamentals expected to remain weak from high unemployment and volatility in investment returns

Key Risks
· Further losses expected in commercial property · Regulatory capital exposure to credit migration · Sovereign credit profile pressure · Pressure on investment return guarantees · Weak premium rate environment for some non‐life lines 

Corporates Overview 
Corporate Negative Outlooks
(% of portfolio) 60 50 40 30 20 10 0 Q307 Q407 Q108 Q208 Q308 Q408 (Quarter/year) Source: Fitch Q109 Q209 Q309 Q409 Q110 EMEA North America EM All

Outlook Trend
· Ongoing stabilisation of rating outlooks · EM growth compensates for flat performance in western Europe

Key Risks
· Overcapacity — reducing expansionary capex needs but hampering profitability · As the benefits of central fiscal stimuli fade, increased private sector investment is needed to sustain growth · Leveraged finance refinancing risk

The Credit Outlook Sovereign Debt Worries Cloud Fragile Economic Recovery May 2010 

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Global Infrastructure and Project Finance Overview 
Key Risks
· · · · · Revenue growth Counterparty stress Energy prices Employment growth Inflation 

Structured Finance Overview 
Structured Finance Negative Outlooks
(% of portfolio) 50 40 30 20 10 0 Q109 Source: Fitch Q209 Q309 (Quarter/year) Q409 Q110 EMEA North America All

Outlook Trend
· Aggressive 2006 and 2007 vintages drive negative outlooks in most sectors · Negative outlooks for US RMBS, due to continued weakness in US residential real estate · Stable ratings for consumer ABS senior classes are expected to continue · Concerns over refinancing a key factor in negative outlooks for CMBS and structured credit

Key Risks
· Elevated unemployment rates and weak recovery · Continued depressed property values and high loss severities · Refinancing risk where loan maturities are approaching · Sovereign risk and rising rates in the eurozone 

Sovereign 
Developed Markets
High‐grade sovereign credit profiles remain under pressure following the extraordinary intervention and support for the financial sector, as well as fiscal stimulus packages. However, the deterioration in public finances primarily reflects the severity of the recession which has hit “tax‐rich” sectors especially hard (finance and housing), and driven up welfare spending. Moreover, government debt is rising most rapidly in those economies that experienced the largest run‐up in private sector indebtedness prior to the crisis, notably the US, UK, Spain and Ireland. However, the sovereign currently (May 2010) under most pressure — Greece (‘BBB­’/Negative) — did not incur large fiscal costs in support of its financial sector, and did not experience a severe recession. Rather, the crisis of confidence afflicting Greece reflects previous episodes of fiscal mis‐reporting and indiscipline, as well as concerns over the political will and capacity to implement the fiscal and structural reforms necessary to place public finances on a sustainable path.
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Greece’s EUR53bn gross financing requirement for 2010 pales into insignificance against total borrowing by European governments this year — which Fitch projects will be EUR2,200bn, slightly greater than the historical high of 2009. The sharp increase in short‐term debt by many sovereign borrowers is a source of concern, due to the higher exposure to interest rate shocks — and, potentially, financing shocks. The crisis in Greece underscores the importance of credible fiscal consolidation programmes for maintaining investor confidence and market access. Small so‐called “peripheral” economies of the eurozone — notably Portugal and Ireland (both downgraded to ‘AA–’ over the last six months, though the Outlook on Portugal remains Negative) — and to a lesser extent Spain (‘AAA’/Stable), are suffering contagion from the worsening Greek financial crisis. While all face significant economic and fiscal challenges, Fitch regards their underlying sovereign credit fundamentals as much stronger than Greece. Nonetheless, Fitch has highlighted the need for a strengthening of fiscal consolidation programmes, and the substantial additional measures recently announced by the Portuguese and Spanish governments to reduce their budget deficits are being assessed. The budgetary and economic restructuring challenges facing European countries with twin fiscal and current account deficits has raised investor concerns over the sustainability and policy framework governing the eurozone. The announcement of a package of financial support measures by the EU and IMF in excess of EUR720bn, and the decision by the ECB to purchase private and public (including sovereign) debt securities, has significantly eased near‐term financing risk faced by some eurozone governments. Moreover, the European Commission has drafted proposals to strengthen fiscal surveillance and discipline in the eurozone. Nonetheless, until governments are seen to be delivering on bringing budget deficits down — and economic recovery is secured — further episodes of volatility in government bond markets (and financial markets more generally) is likely. While the current market and media focus is on the eurozone, most high‐grade sovereign governments face significant budgetary adjustment in the order of 4pp‐ 7pp of GDP — just to stabilise the public debt ratio at the elevated levels projected for end‐2011. The potential for negative “fiscal surprises” and volatility in government bond markets — including beyond the eurozone — will remain high for the foreseeable future. Against this backdrop and amid heightened concerns over sovereign creditworthiness, governments will need to respond in a timely and credible fashion to ensure that budget targets are met and debt levels stabilised — and eventually lowered — over the medium term. The governments facing the most challenging budgetary adjustment over the medium‐term are Japan, Ireland, the UK, Spain, the US and, to a lesser degree, France. For the US, the near‐term risk to the ‘AAA’ status is low given its exceptional financing and economic flexibility, and the US dollar’s role as the world’s predominant reserve currency. Nonetheless, Fitch expects public debt on a general government basis (i.e. consolidated federal, state and local) to rise to more than 90% of GDP by end‐2011 (up from 57% at end‐2007), which would mark the highest level among current ‘AAA’‐rated sovereigns. The UK faces a similarly daunting fiscal challenge; but with lower financing flexibility and a less dynamic economy, in the absence of greater urgency in reducing its record budget deficit, the UK will be vulnerable to further economic and financial shocks. Government debt continues to rise inexorably in Japan — gross government debt is equivalent to two times annual national income. Concerns over the long‐run sustainability of public finances are compounded by persistent deflation and the absence of a credible commitment to fiscal consolidation.

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Emerging Markets
By contrast, the performance of many emerging markets (EMs) through the crisis has demonstrated considerable resilience against an extraordinary external shock. The ability to pursue counter‐cyclical monetary and fiscal policies is testament to the stronger macroeconomic and credit fundamentals of EM economies going into the current crisis in comparison with previous crises. But while significant monetary and fiscal stimulus has prevented deep recessions in most, inflationary pressures are beginning to emerge — most notably in Brazil, China and India — and timely policy response will be necessary to ensure that monetary and macroeconomic stability remains firmly secured. Nonetheless, there are significant divergences in economic performance and credit quality across EM economies. Moreover, although emerging economies (especially in Asia) have led the global economic recovery, this primarily reflects the rebound in global trade — and the inventory cycle that will only be sustained if there is a recovery in final consumption demand in the major advanced economies (MAEs), most notably the US. The success of EM is a function of strengthened macroeconomic policy frameworks and globalisation — global economic recovery cannot be sustained without the EMs, but nor can it be powered by them alone. For China, the transition to greater reliance on market mechanisms and a consumption‐led economy is vital to sustaining growth over the medium‐term — but is also associated with potential risks to macro‐financial stability. Though the state‐ and credit‐led stimulus programme has been supportive of global as well as Chinese growth, the transition away from an investment‐ and export‐led economy remains a medium‐term challenge for the authorities. In contrast with previous crises, Latin America demonstrated strong resilience to the significant external financing shock. The region entered the period of the global financial crisis in relatively good health, with record‐high international reserves, manageable external account imbalances, modest government debt burdens, and comparatively healthy financial systems that were not exposed to “toxic” assets or highly dependent on external funding. Moreover, economic recovery in the region has been significantly supported by expansionary economic policies, an increase in commodity prices since the trough in early 2009, and a recovery in external private capital inflows. Fitch expects Latin American economic growth to recover to 3.6% in 2010, reinforced by a more favourable global financial and economic environment, a further modest increase in commodity prices, and continued capital inflows. On the domestic front, demand will be underpinned by a recovery in consumer and business confidence indicators and continued supportive economic policies. The economic and credit outlook for Emerging Europe remains mixed. More than a third of the sovereign ratings remain on negative outlook as they cope with the legacy of (largely western European) bank‐fuelled credit booms. Nonetheless, the balance of rating outlooks is becoming more favourable, and negative rating actions over the coming 12 months are likely to be significantly down on the 2008‐09 period as economies recover and private sector balance sheets are healed. 

Public Finance 
EMEA
European local and regional governments (LRGs) will continue to face tough challenges and difficult policy decisions in 2010, as they adjust to reduced fiscal revenue whilst managing very rigid operating expenditure in a number of countries. Downward rating pressure will continue, especially for entities with long‐term structural problems. These are mainly LRGs that have greater reliance on fiscal revenue related to economic activity on their territory (such as personal income tax, corporate income tax or VAT), or taxes related to property transactions (such as
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stamp duty or property transfer tax). Furthermore, in some jurisdictions there is a time lag between a decline in economic performance and the impact on budgets — this can be one or two years, depending on the timing of filing tax returns. The economic slowdown will result either (at best) in a very modest rise in tax revenue compared with 2008, or (at worst) a decline, as experienced by a number of LRGs in 2009 whose tax revenue declined by up to 20% compared with 2008. LRGs with a greater dependence on tax revenue from the sale of housing or building activities have been particularly affected, as these sectors have experienced the greatest slowdown. Unemployment will have a negative impact on revenue, with fiscal revenue such as personal income tax, corporate income tax and VAT under pressure due to muted profitability and a fall in consumer confidence and spending. Fitch expects higher overall deficits to continue to be recorded through 2010, and in some cases this will be at the current balance level as some LRGs have found it difficult to rein in operating expenditure — due to its rigidity and sheer essential nature (such as health care and education in some instances). Furthermore, capex in public infrastructure is expected to remain high in 2010 and 2011, as LRGs adopt anti‐cyclical measures to boost employment activities in parallel with policies adopted by the various central governments. In addition, the sharp increase in the immigrant population, and ageing of the population, will continue to put pressure on education and health care expenditure in those countries where these responsibilities have been devolved to LRGs. Although access to the capital markets has improved — and many LRGs have tapped this source of funding — substantial debt still needs to be refinanced or raised in 2010 to cover budget deficits. Fitch expects total issuance to remain high this year.

United States
The US public finance rated universe is large and diverse, with many distinct credit drivers. While this asset class overall exhibits a high level of credit quality and stability, the common theme for 2010 focuses on budget constraints in the wake of the financial crisis, as well as recessionary pressures. On the whole, states have experienced extreme financial stress, with the state tax systems reacting quickly to changing economic conditions. Reserves, which were built up in the recovery, have been largely drawn down for budget balancing. Without federal stimulus assistance, draconian cuts would have been required in most states. The phase‐out of federal stimulus funds is a pressure, while the budgeting decisions made by many states to under‐fund pension obligations serves to exacerbate longer‐term pressures. However, stabilisation has been achieved by various factors, as states generally have broad economic and tax‐base resources — and exhibit sovereign attributes, as they have substantial control over taxing and spending, although this varies somewhat from state to state. Furthermore, debt levels are generally low (<2% of personal income) to moderate (2% to 7%), and debt service does not place a significant demand on revenues. In many states, the rate of loss is slowing and actual revenues are approaching previous estimates. However, performance is still weak, and unemployment levels are very high. In the tax‐supported segment, most municipal governments will face at least another year of heightened financial pressures. Stabilisation of — and improvement in — sales and other economically sensitive taxes, will likely be offset by weakness in property taxes, the cornerstone of most local governments’ revenues, as continued declines in property values work their way through the property assessment system. It is also expected that local governments will feel the impact of continued state budget gaps, due in part to the scheduled phasing‐out of federal stimulus relief.

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Management has played a significant role in how economic stress has affected credit quality; the impact of eroded operating margins will be mild if management demonstrates its willingness and ability to make the necessary adjustments to maintain prudent reserves. Local government debt levels will be stable to slightly higher in 2010. For the water and sewer sector, the greatest threat to financial stability over the near‐term is declining revenues, as utilities have contended with dwindling connection fees, moderating usage, and falling investment income. To mitigate the impact of these revenue declines and to maintain credit stability, it will be critical that rate‐setting bodies continue to implement rate hikes that ensure full‐cost recovery and preserve financial margins. This could prove challenging in some cases, as government officials seek to limit utility increases in the face of rising taxes and fees to support other governmental functions, which in many cases are under severe budgetary stress. Continued economic weakness could erode financial performance, and so access to capital markets for infrastructure‐funding is critical. If there is difficulty accessing capital, and projects cannot be delayed, utilities could be forced to implement rapidly escalating rate hikes to accommodate much higher fixed costs or to increase “pay‐as‐you‐go” capital funding. The healthcare sector will experience revenue pressure, cost inflation and volume losses, which will more likely result in erosion of margin and coverage in 2010 than in 2009. Negative rating pressure will continue to be disproportionately felt by lower‐rated entities due to their smaller market positions, lighter financial resources, and more limited access to capital. The impact of healthcare reform on providers is uncertain. However, the providers of scale with robust and diverse revenue streams should continue to absorb the effects of reform without credit deterioration. Those organisations without such attributes, or with limited success, will likely be pressured to remain independently viable. The main rating driver in the housing universe is the continued economic pressure on homeowners, which has been caused by falls in home price valuations, the presence of negative borrower equity, and the continued decline in mortgage loan performance leading to higher foreclosure rates. Profitability at State Housing Financing Agencies (SHFAs) has been declining, with reduced interest income on investments and increases in loan‐loss reserves. Many SHFA variable‐rate demand bonds are backed by liquidity facilities that have expiration dates in 2010, and will be under pressure to renegotiate with the existing provider or find new liquidity providers. The anticipated rise in conventional mortgage market interest rates should make the SHFA loan product more attractive, spurring more loan originations. Overall, the public power sector continues to benefit from solid credit fundamentals, including: the basic necessity of an available electric service; local control over rate‐setting without state commission oversight; a cost advantage compared with neighbouring investor‐owned utilities; and benefits associated with a diversified and predominantly residential and commercial customer base (as opposed to an industrial customer base). Risks include increased costs associated with compliance to state (and potentially federal) renewable portfolio standards. Also, the spectre of congressional carbon legislation or EPA carbon regulation will have an impact on power costs in the “fossil fuel” dependent regions (Southeast, Midwest, Texas). Several public power utilities are still pursuing large capex programmes that will require them to increase leverage, causing higher rates and a loss of financial flexibility. Higher education will continue to benefit from strong revenue generation, tied largely to students; and sophisticated financial and investment management practices, which has helped to mitigate the downdraft in college endowment and

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long‐term investment performance created by turbulence in global financial markets in late‐2008 through mid‐2009. However, competition among institutions is expected to intensify. 

Financial Institutions 
Fitch’s rating outlooks for financial institutions should stabilise further in 2010, as many entities raised capital to strengthen their balance sheets or experienced downgrades in 2009/early‐2010. In addition, a significant minority of banks, especially in EMEA and Asia, are currently at their sovereign‐derived support rating floors, limiting rating pressure to that derived from the sovereign credit profile. Nevertheless, financial institutions typically lag underlying economic recovery, and unemployment rates have yet to peak in most major economies. Therefore, pressure remains on asset quality and financial systems. Profitability should improve from the lows of 2009, particularly as access to the capital markets has become easier and funding costs have been reduced somewhat — though many financial institutions still face profitability weakness from holding higher levels of capital and liquidity. Lingering margin pressure from low interest rates, potential continuation of high levels of credit costs (provisioning or losses), and (for many) the cost of holding higher levels of liquidity throughout 2009, continue to weigh on the financial institutions rating universe. A protracted weak economic recovery could have an impact on outlooks, as could various changes in regulatory environments over time. There is currently much debate at both national and international levels on the shape of future banking regulation. Broadly speaking, these discussions fall into two areas: a change to address idiosyncratic risks, and to address systemic risks. Although these measures should make banks less likely to fail, they may inevitably curb their profitability. Addressing the systemic risks, arising especially from the size and interconnectedness of large international financial institutions, is considerably more challenging, and progress is likely to be slow.

North America
Some modest improvement in outlooks is expected in 2010. Many US financial institutions which experienced downgrades in the wake of the financial crisis successfully raised capital in 2009 to help stabilise their balance sheets. However, the high proportion of negative outlooks in North America relative to other regions reflects the continued asset quality pressure on regional banks related specifically to their significant commercial real estate exposure. Finance and leasing companies also have negative outlooks, with both consumer and commercial operations continuing to face challenging operating environments. Key rating issues relate to access to stable sources of liquidity; refinancing risks; and negative asset quality trends. Securities firms and investment managers have stable outlooks, with those companies benefiting from the improving capital markets. Canadian financial institutions face a more stable economy that has weathered the global financial crisis much better than that of the US. Asset quality and capital have held up despite some of the deterioration experienced elsewhere during the crisis.

EMEA
Pressure on asset quality and financial systems is also prevalent in developed Europe. However, the higher proportion of stable outlooks in the region is driven by the fact that a larger proportion of the region’s ratings are at their support floors. This contrasts with North America, where very few ratings are driven by support.

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The negative outlooks in developed Europe reflect some of the challenges the unsupported financial institutions face as they emerge from the global economic recession. Emerging markets in Europe were the worst affected by the financial crisis, and are therefore a primary driver behind the negative outlooks for EMEA. Although the Russian banking system has accounted for a large part of these, positive rating pressure may develop due to improvements in the financial system infrastructure, in particular access to liquidity. The preponderance of stable outlooks in the Middle East and Africa relates largely to the fact that many are at their support floor ratings in those regions.

Emerging Markets
Asia‐Pacific financial institutions have been relatively unharmed by the global financial crisis and subsequent recession. This was due to only limited exposure to developed market financial assets; ample deposit funding; and liquidity from high domestic saving rates and the absence of major residential real estate bubbles. Banking systems in the region have benefited from the economic recovery since early 2009, and Fitch generally expects asset quality problems to remain manageable. This is both in terms of the absolute level of non‐performing assets that ultimately emerge, and in terms of the banks’ ability to maintain sufficient operating profitability to absorb the impact of falling balance sheet valuations as they are recognised. Outlooks across Asia‐Pacific are overwhelmingly stable. However, given the interconnected nature of the global economy, and the reliance of many regional economies on international trade, positive rating pressure is subject to the US and Europe achieving a more sustained and durable macroeconomic recovery. Fitch has growing concerns about continued credit expansion and rising leverage in the Chinese banking system, and the outlook for asset quality and real estate prices in this rapidly growing market. In Japan, capital quality will remain an issue for some banks, with the sector as a whole having poor prospects both for profitability and asset growth in a deflationary zero‐interest‐rate environment. Consequently, in both China and Japan, individual ratings remain under downward pressure; and although many banks are assigned a stable outlook, in a majority of cases this is because they find themselves at their support floors. In Latin America, ratings are predominantly stable as a result of the region’s economies recovering quickly from economic contraction — which has been sharp in many countries, but generally of a short‐term nature. Despite weakness in the US economy and the broader recession across the developed markets, Latin American financial institutions managed relatively well through the crisis, reflecting the resilience of most of the region’s national economies. The outlook for the region points to accelerating growth and stabilisation of rating outlooks. Banks remain profitable, and fundamentals have held up despite expected deterioration in asset quality. Capitalisation in the sector has improved and funding pressures are receding, although institutionally‐funded non‐banks and some mid‐ sized banks in various countries have experienced liquidity problems. 

Insurance 
Ratings for the life and non‐life sectors remain largely on negative outlook, although ratings stabilisation is expected in several markets during 2010. The main differentiator between life and non‐life is their relative exposure to the turmoil in credit and equity markets, with the former maintaining higher investment leverage and greater susceptibility of many products to recessionary or inflationary pressures, particularly due to the longevity of products. The reinsurance sector outlook is stable.
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The ratio of negative outlooks is very similar in the US and EMEA although some differences in the nature of risks do exist by market. For example, European insurers clearly have greater exposure to eurozone sovereigns, a number of which have come under some pressure in recent weeks. In contrast, in Fitch’s view US insurers generally have greater exposure to further realised losses from commercial real estate.

Life
Negative rating pressure in the life sector in 2010 results from the risk of further investment losses (particularly in the commercial real estate market), weaker operating fundamentals, and lower coverage metrics and risk‐based capital pressures relative to credit migration in fixed‐income portfolios. In addition, the current low‐interest‐rate environment presents significant challenges for many insurers, especially in the presence of guaranteed investment returns. Rating actions taken by Fitch in 2009 incorporated a conservative forecast for additional investment losses, and a slow economic recovery. Rating downgrades will continue to outnumber upgrades in 2010, although the pace and number of downgrades will moderate compared with the previous year.

Non‐Life
The outlook for the personal and commercial line sectors for the non‐life (property/casualty) insurance industry remains negative — with the exception of the UK and Germany, which were revised to stable from negative in March and May 2010, respectively. Risks have focused on the volatile investment markets and uncertain economic conditions, although concerns for some markets are now shifting more towards the traditional underwriting cycle and competitive pressures. In particular, the commercial segment in the US market is characterised by intense competition and unsustainably low pricing. The non‐life outlook in the UK and Germany have been revised to stable due to expectations that earnings will stabilise during 2010; improved rates in some key lines; and an improvement in macroeconomic conditions. In the US, it is anticipated that the personal lines sector may return to a stable outlook earlier than commercial lines — due to more visible signs of improvement in pricing, and Fitch’s view that the personal lines segment is less likely to see very weak pricing levels (for example, ratios of claims plus expenses to premiums in excess of 110%).

Reinsurance
Ongoing improvements in capital markets conditions have sufficiently eased concerns regarding reinsurers’ ability to access funding on reasonable terms following a significant catastrophe event. Concurrent with these improvements, the 2009 hurricane season in the US passed without a major event, dramatically reducing reinsurers’ exposure to potential near‐term needs for capital. The reinsurance sector’s credit quality is less sensitive to macroeconomic factors than that of many other financial services. Reinsurers are most directly exposed to macroeconomic deterioration through pressures on the asset side of their balance sheet. In this regard, asset quality within reinsurers’ investment portfolios is relatively high, with values having improved markedly in 2010 to date. Compared with primary market peers, reinsurers were resilient in the course of the 2008−2009 financial crisis, and have generally rebuilt their capital bases to the levels last seen at the end of 2007. Moreover, the lack of practical alternatives to reinsurance, including limited activity in the insurance‐linked securitisation market, continue to place reinsurers in a strong competitive position to provide capacity for the insurance sector.

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Corporates 
EMEA
In Q110, Fitch’s forecast trend towards stabilisation of rating outlooks has gained modest momentum, at existing or lower rating levels than at the start of the credit crunch. However, with economic growth still very tentative across Europe, the main risk to corporates in the region is that of a double‐dip recession. Corporate credit profiles will be at risk if economic growth is dampened as a result of fiscal tightening by countries needing to avoid further deterioration of state finances. By contrast, the direct risk to company ratings of a modest sovereign downgrade in high‐grade countries is considered limited, as most corporate ratings (particularly in high‐grade countries) have no direct linkage to the sovereign. The slow economic recovery is mirrored in expectations for capex. Fitch’s rated EMEA universe cut capex by 8% on average in 2009, and is not forecast to increase spend from this low level for the next two years. This behaviour reflects a number of factors, including a continued focus on cash preservation and (for some companies) more difficult access to financing, although the key driver is the substantial overcapacity persisting in many industries. In cyclical industrial sectors, eg automotive and basic materials, companies estimate it may take five to seven years to recover the level of demand experienced at the peak of the last cycle. Overall, Fitch expects EMEA rated corporates will only return to 2007 levels of absolute profitability beyond 2011. This subdued activity will have obvious negative knock‐on effects on employment and GDP throughout the economy. So how to achieve top‐line growth? At this stage of the post‐crisis cycle, the spectre of shareholder‐biased activities is likely to resurface. M&A deals may still form a trickle rather than a flood, and are funded in a conservative way by an equity portion (eg Kraft/Cadbury), although market appetite may gradually allow greater debt‐funding during the year. The liquidity crunch is receding, and for large investment‐grade entities the bond market is keen to provide the term‐out funding required. Many businesses are focused on increasing their exposure to growth markets in the BRICs (Brazil, Russia, India and China) and other emerging markets, given that developed market consumers are constrained by the need to deleverage — and with an ongoing tone of job insecurity. An absence of opportunities for acquisitions may drive companies to dividend increases (having reduced payments in 2009) and share buybacks. Overall, these actions are typically negative for credit profiles. In the leveraged finance universe, the good news in the short‐term is that the default rate is expected to fall. However, many LBOs continue to have unsustainable capital structures, and will begin to face bullet repayments from 2012 which will require refinancing. With a large proportion of Fitch’s shadow‐rated leveraged portfolio rated ‘B‐’* and below, the availability of such refinancing (bond, bank, CLO) cannot be taken for granted, especially for the weaker LBOs. Continued dislocation at the sovereign level may also affect market access for such entities.

United States
The US corporate recovery is expected to be unusually slow because the economy has fallen unusually far — the excess industrial and labour capacity that has to be absorbed before investment can return to normal is larger than in recent recessions. Total industrial capacity utilisation in 2009 was only 70%, the lowest since 1962 when the government started compiling the data. The previous low was 74% in 1982, during the 1980‐83 double‐dip recession. However, with the severe down‐cycle having turned, analysis is now concentrating on the unique risks each issuer faces in a prolonged period of slack demand.
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As in EMEA, sovereign/state/local government funding pressure forms an important backdrop to the corporate recovery. The pressures on state and local budgets in the US, which will intensify in the absence of further federal aid, may result in weakening aggregate demand and falling employment. Individual companies also face the risks of being “drafted” into trade wars, as countries and trading blocks attempt to maximise exports and minimise imports. Rising interest rates would challenge the relative ease with which corporates are refinancing debt. Real rates are arguably at average levels, but even real rates will have to go up eventually unless there are major changes in US fiscal policy. One of the reasons companies have been able to refinance rather than default since late‐ 2009 is that nominal, risk‐free interest rates are so low that even an enormous risk premium results in a manageable, high‐single‐digit nominal rate. The current average nominal yield for ‘BBB’ bonds of about 6.2% is slightly below the 7.3% average for the last 75 years. In the leveraged loans space, the refinancing cliff of 2012‐2014 is similar to that in Europe. However, buoyant capital markets conditions in Q110 have been seized upon by many refinancing issuers, and Fitch believes market forces will combine to smooth out much of the steep maturity curve.

Emerging Markets
The largest EM economies are demonstrating a greater resilience than their developed market peers, underlining the prospect of a two‐speed return to trend growth levels. In turn, this is leading to a relatively faster rate of recovery in the credit quality of corporate issuers domiciled in the major EMs. However, a global double‐dip recession scenario would clearly have a substantial negative impact on corporates in EM economies — and particularly those that are more exposed to, and dependent on, global export markets. In Asia, one of the principal credit themes is the initiation of tightening measures by the Chinese authorities to try to rein in price inflation in various asset markets. China’s tightening measures have included increasing bank capital reserve requirements, raising interest rates, and implementing directives to the banks regarding their lending practices. Some specific measures have also been directed at speculators operating in the housing market, reflecting concerns about the development of a potential bubble in certain regional markets. While Fitch shares these concerns, and recognizes the need for the Chinese authorities to manage pro‐actively the pricing dynamics of the market in order to aid genuine demand from local workers, the agency’s outlook on the sector is for a generally stable environment in 2010. Rated issuers in this universe have contracted sales for their foreseeable future, but the real concern is entities purchasing land now for build‐outs in two to three years’ time. With Asia’s large EM economies — China and India — expected to continue leading the global economic recovery (with projected GDP growth rates of 8.8% and 7.0%, respectively, for 2010), Fitch expects that corporates in these countries will continue to pursue targeted growth strategies. These would likely involve increasing levels of outward cross‐border M&A activity designed to enhance access to commodity raw materials and energy security, as well as expanding geographical diversification and vertical integration. Fitch expects that some Indian corporates will opt to use debt to finance acquisitions, potentially exerting some stress on credit metrics, whereas Chinese state‐owned companies are more likely to utilise the government’s huge foreign exchange reserves as an acquisition currency. In Latin America, market sentiment is improving and there is a return to a more “normal” business environment. Liquidity risk, in particular, has eased as the

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availability of financing recovered strongly in the second half of 2009. Since the middle of 2009, several non‐bank corporates with ratings that range from ‘B’ to ‘BBB’ have successfully tapped the debt capital markets. As a result of these capital market conditions, plus above‐average support provided by relationship banks and government development banks, capital structures can generally be described as above average. Debt amortisation schedules appear manageable for most rated companies in the region. Across central and eastern Europe (CEE), the Middle East and Africa, corporate credit quality remains more challenged than in other EM regions, reflecting more uncertain economic prospects — especially across the CEE territories. Investment levels are expected to recover through 2010, and to stabilise broadly at these heightened levels through 2011 as domestic markets begin to recover. These improvements in local economies are being driven substantially by the recovery in commodity prices since mid‐2009, with a slowdown in de‐stocking and strong demand from China having been key drivers. 

Global Infrastructure and Project Finance 
Revenues for most transportation and energy credits have stabilised, and should benefit from continued growth. Infrastructure and project financings were affected in the downturn, but benefited from a substantial core of demand as well as structural liquidity features that dampened credit volatility. Following two consecutive years in which Fitch downgraded ratings or assigned negative outlooks to reflect increased economic risks, ratings in the transportation and energy sectors have generally settled at levels consistent with the current environment. This is primarily due to a return to modest growth in both the developed and developing economies, although both the strength and duration of the recovery remain uncertain. Where revenue is linked to inflation, as in many social infrastructure transactions benefiting from inflation‐linked government payments, growth may continue to be below expectations in this low‐inflation environment. The continuation of relatively high unemployment levels may dampen demand growth during the recovery, particularly in the developed economies. Facilities in which discretionary spending by consumers is an important part of revenue are more exposed than facilities essential to daily life in the local economy. Transportation and energy credits in developing economies were less affected by the downturn, and exhibit stronger growth in demand in the recovery than their counterparts in developed economies. Deferred maintenance and under‐investment in infrastructure assets held by the public sector has created pressure to increase leverage to fund required capital investment, notwithstanding currently diminished traffic and revenues. This has become particularly evident in the US transportation system. The current level of stress on local government budgets suggests that traditional capital support from state owners of infrastructure will be increasingly difficult to obtain and may be impractical to finance. An increase in user paid tariffs may be politically unachievable in the current environment. Additional leverage to fund infrastructure growth without corresponding revenue growth from increased tariffs, could create downward rating pressure. Public private partnership (PPP) financing of infrastructure along lines now common in Europe, and the use of PPP concessions to monetise existing assets, may be increasingly used to reduce budget pressure and fund necessary infrastructure investment. Project financings involve long‐term debt that typically requires some growth in revenues over time to support full and timely repayment. The effects of the recent
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period of growth below expectations have been factored into the current ratings. A prolonged sluggish recovery creating growth rates continuously below expectations would create additional rating pressure, as it will become increasingly unlikely that a project can reach its long‐term revenue objective through exceptional future growth. Energy projects with power purchase agreements and transport assets — like airports and maritime ports with strong lease agreements — were helped through the downturn by structures supporting demand and holding down costs. The credit quality of weak counterparties, particularly in the airport and maritime sectors, remains a concern. Although the monopolistic positions of the supported infrastructure assets, and the essential nature of the needs they provide (which has been proved even in periods of economic stress), have historically mitigated weak counterparty risk, the related industries are more challenged today than ever before — and the ratings on supported projects may be subject to greater volatility. The energy sector can benefit from the increases in energy prices and demand that may be generated by the increased economic growth anticipated in the recovery. But a second dip in prices and demand — due to sluggish economic growth — would put further pressure on merchant facilities. It might also create pressure on facilities that have relied on the support of “take or pay” contracts to remain stable in the downturn. The credit quality of off‐take counterparties would be negatively affected by prolonged weak energy prices and demand, placing pressure on the ratings of supported facilities. Conversely, a return to sustained high oil prices will also affect all transportation sectors — again, with airline and shipping company viability more at risk — and toll road activity subject to tepid growth. The emergence of an uncertain energy price regime creates additional challenges. The correlation of power prices to natural gas prices diverged significantly over 2009; and while natural gas prices have recovered, they are still a distance from the historical relationship. While these prices are expected to stabilise, at what level this settles is unknown, and the impact on merchant power projects is uncertain given their vulnerability to displacement from more efficient gas‐fired facilities. Renewable energy facilities remain stable, and are less affected by energy prices or demand — as they typically benefit from supportive regulatory regimes. Declines in traffic on toll roads have exceeded levels typically associated with the decline in economic activity and GDP in a recession. Toll roads were adversely affected at first as a result of sharp increases in fuel prices in 2007. Once fuel prices declined, unemployment and falling GDP became the drivers of reducing traffic on toll roads. Even with the return of modest GDP growth, weak employment growth during the recovery may continue to affect toll roads. The current low level of inflation has clearly affected social infrastructure projects (schools, government accommodations, hospitals) that benefit from inflation‐ indexed availability payments. The financings were structured around revenue forecasts anticipating inflation in the range of central government forecasts (2%‐ 2.5%). A prolonged low level of inflation could lead to reduced debt service coverage unless there is an offsetting reduction in expenses. On the other hand, high levels of inflation loom over many economies as a result of massive government spending during the downturn. Moreover, high levels of inflation may cause operating and maintenance costs to outstrip revenue growth in some project financings.

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Structured Finance 
In all major markets, recessionary conditions (particularly higher unemployment) continue to put pressure on MBS and ABS, to varying degrees. Sustained or worsening levels of unemployment are a key risk factor in ratings performance in several markets. Lack of refinancing opportunities — due to depressed property values and ongoing deleveraging of the banking system — continues to pressure CMBS across the globe. While residential and commercial property values have stabilised somewhat in major markets such as the US and UK, additional declines are a substantial risk, particularly for residential real estate.

United States
US structured finance continues to be characterised by deteriorating outlooks for asset performance, despite indications of a gradual recovery in US economic conditions. Further weakness in asset performance is not likely to translate directly into near‐term ratings downgrades in most sectors, however, as rating actions taken to date have incorporated a degree of prospective stress. Key variables that will significantly influence asset performance trends include unemployment (which Fitch expects will remain high) and GDP growth (which the agency projects at 3% in 2010). The extent of recovery and stabilisation in US capital markets is also a key variable that will influence performance across all sectors. With US structured finance issuance minimal since 2007, there is a large concentration in transaction vintages from 2006 and 2007. These vintages, originated at the peak of the market, exhibit aggressive credit characteristics (especially in RMBS and CMBS). and are likely to continue to experience performance issues and have a negative outlook — even into a general economic recovery. ABS ratings have been relatively resilient through the course of recent economic turbulence. However, downgrades exceeded upgrades in Q110, with student loan ABS accounting for much of the activity. Sectors directly correlated to consumers (credit card and auto) are expected to incur increasing delinquencies and losses in 2010. Unemployment remains the key credit driver underlying delinquency and default performance trends in these sectors. Fitch’s rating outlook for prime credit card and auto loan senior classes is stable, as highly‐rated consumer ABS can withstand substantial additional deterioration. Unemployment is also a key risk driver for RMBS, alongside further declines in housing prices. Fitch’s current expectations are for an approximately 10% national decline in housing prices throughout 2010. The number of severely delinquent borrowers in RMBS pools has continued to build, creating the potential for large volumes of loan liquidations, adding downward pressure on housing prices. Meanwhile, principal forgiveness programmes add to uncertainty. As a result, Fitch’s outlook for prime, Alt‐A, and subprime RMBS ratings remains negative. Concerns for CMBS centre on the availability of financing, together with continued severe declines in property values, which will drive performance trends in the sector. Large floating‐rate loan transactions are particularly at risk, due to concentrations of maturing loans that are secured by more transitional assets and hotels. The speed and scope of economic recovery in the US will have an impact on asset values and performance trends across all the property sectors of CMBS, which are sensitive to levels of GDP growth, employment and consumer spending. Fitch’s rating outlook for fixed‐rate transactions is stable — given that recent rating actions address the continued rise in delinquencies. Most large loan transactions will retain some 'AAA' rated bonds, but the outlook for the lower‐rated bonds is negative.

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In structured credit, CDOs collateralised by middle‐market and high‐yield corporate loans have experienced collateral credit deterioration generally in line with historical peaks, resulting in stable ratings for high‐investment‐grade tranches. This trend is expected to continue in 2010, subject to the risk of worsening economic conditions. The availability of refinancing for corporate debt becomes a factor for large amounts of debt maturing in 2013 and 2014. As maturity dates approach without better refinancing opportunities in the market, any inability to achieve refinancing will move over time from becoming a possibility to a greater likelihood. If there is no significant easing in lending conditions, this could cause further downgrades of specific transactions. However, as far as US leveraged loans are concerned, Fitch believes that the gap between demand and supply is much smaller than absolute debt maturities imply. Lastly, the performance of bank trust preferred securities collateral is under stress due to banks’ exposure to distressed commercial real estate.

EMEA
The difficult economic environment will continue to exert negative rating pressure on EMEA structured finance transactions. Outlooks for ratings in most sectors remain negative, reflecting the high concentration of outstanding transactions from the aggressively structured vintages at the peak of 2006 and 2007. However, performance has stabilised in some sectors, and the outlook is brighter as a result of stronger prospects for GDP, growth and unemployment. Sovereign risk has emerged as an issue within the eurozone, most specifically for structured finance transactions secured on assets located in Greece. Despite membership of the eurozone, Fitch determined that the degree of uncertainty implied by the heightened level of sovereign risk meant that structured finance ratings up to ‘AAA’ could no longer be supported. As a result, many Greek structured finance securities that were previously rated ‘AAA’ have been downgraded to ‘AA‐’. A continued negative outlook for the sovereign means that Greek structured finance securities will in general also have a negative outlook. While no other eurozone country currently faces the same degree of challenge as Greece, a similar approach would be taken to other countries in the event that of similar developments. In the ABS market, the consumer segment continues to perform relatively well in most jurisdictions; however, performance in Spain remains under significant pressure — due to the economic downturn and sharp increases in unemployment which has reached 20%. Arrears have increased, and recoveries are expected to be weak compared with initial expectations. UK credit card transactions have seen stabilised delinquencies and charge‐offs since peaking in 2009, but high indebtedness and continuing rising unemployment through 2010 means this sector remains vulnerable. In the RMBS sector, negative rating pressure is likely to remain focused on junior classes. However, some criteria changes (for example, in respect of the Netherlands NHG‐backed RMBS), as well as isolated transactions with outlying poor performance, could see negative rating action further up the scale. Spanish RMBS which have riskier attributes (eg high LTV) will continue to face performance challenges, with high arrears and low recoveries expected. UK prime RMBS has experienced increased arrears, while cumulative peak‐to‐trough declines in house prices are ultimately expected to reach approximately 25%. However, credit protection is such that only junior tranches should suffer potential rating action. UK non‐conforming RMBS are benefiting from the current lower interest rates which support performance, yet transactions remain vulnerable to

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interest rate rises, low prepayment limiting accumulation of credit protection, and high loss severities. The outlook for CMBS and structured credit ratings is dominated by looming refinance risk for existing CMBS and leveraged loan CLOs, both concentrated around 2012‐2014. With the erosion of time and no significant easing in lending conditions, this could cause further downgrades of specific transactions. For UK CMBS, prime markets have undergone some recovery, with yields falling. However, the sector remains vulnerable to a renewed downturn — and hence renewed pressure on values. Most synthetic corporate CDOs have already been downgraded to below investment grade. Fitch maintains a negative rating outlook for SME CDOs. Senior tranches are expected to remain stable; but junior and mezzanine tranches remain exposed to negative obligor and sector performance. The 2006 and 2007 vintage Spanish SME transactions continue to face the greatest challenges, and performance is likely to continue to be volatile given the ongoing stressed economic outlook.

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Appendix – Related Research 
Sovereign
· · · · · · · · · Eurozone Contagion: Common Challenges and Fundamental Differences, 10 May 2010 EMU Convergence Report: 2010, 6 May 2010 Just How Indebted Is the Japanese Government?, 22 April 2010 Latin American Sovereign Outlook 2010, 20 April 2010 Global Economic Outlook, 1 April 2010 ‘AAA’ Sovereigns Under Pressure, 11 March 2010 Fitch Ratings Sovereign 2009 Transition and Default Study, 25 March 2010 European Government Borrowing, 26 January 2010 Sovereign Review and Outlook, 22 December 2009

Public Finance
· · · · · · · · · · · · · · · · Institutional Framework for Russian Subnationals, 29 April 2010 Build America Bonds Broaden Municipal Market — Credit Considerations, 27 April 2010 U.S. Public Finance Rating Actions 2009, 22 April 2010 Institutional Framework for New Zealand Subnationals, 20 April 2010 Spanish Autonomous Communities New Funding System, 21 April 2010 Institutional Framework for Australian Subnationals, 7 April 2010 Fitch Ratings International Public Finance 2009 Transition and Default Study, 26 March 2010 Recalibration of U.S. Public Finance Ratings, 25 March 2010 Fitch Ratings U.S. Public Finance Transition and Default Study 1999–2009, 25 March 2010 State Housing Finance Agencies‐ 2009 Review and 2010 Outlook, 25 March 2010 French Regions' Financial Monitor 2010 Amendment (English Version), 19 March 2010 Tax‐ Supported Rating Considerations for 2010, 22 February 2010 2010 Water and Sewer Outlook, 10 February 2010 2010 Nonprofit Hospitals and Health Systems Outlook, 01 February 2010 German Municipalities – Important Role Within the Federal System, 20 January 2010 European Local and Regional Governments Outlook 2010, 16 December 2009

Financial Institutions
· · · · · · · · · · · · · · · · The Role of the ECB — Temporary Prop or Structural Underpinning?, 11 May 2010 Burden Sharing: Who Pays Next Time?, 10 May 2010 Global Bank Rating Trends Q110, 7 May 2010 Improving Bank Liquidity Standards, 5 May 2010 EM Banking System Datawatch, 29 April 2010 EM Banking System Datawatch, 29 April 2010 Banks’ Exposure to European Commercial Real Estate, 22 April 2010 Japanese Mega Banks ‐ Outlook Lacklustre: When Will Profitability Pick Up?, 21 April 2010 U.S. Financial Institutions Financial Reform: Five Issues to Watch, 26 March 2010 U.S. Financial Institutions Financial Reform: Five Issues to Watch, 26 March 2010 Fitch Ratings Global Corporate Finance 2009 Transition and Default Study, 18 March 2010 U.S. Banking Quarterly 4Q09, 08 March 2010 What a Difference a Year Makes: Latin American Banks Review and Outlook 2010, 08 February 2010 U.S. Diversified Financial Services, 03 February 2010 Banks in Asia (Excluding Japan): Outlook for 2010, 02 February 2010 Credit Outlook for Major European Banks 2010 ‐ A Rocky Road Ahead, 19 January 2010

Insurance
· · · · · · · · · German Non‐Life Insurers , 11 May 2010 NAIC Risk‐Based Capital ‐ Key Challenges Interpreting Results , 6 May 2010 Capital Raised in U.S. Insurance Sector: Dominated by Life Insurers , 6 May 2010 Property/Casualty Insurers’ Financial Leverage and Debt‐ Servicing Capacity , 16 April 2010 UK Non‐Life Outlook Revised to Stable.", published 22 March 2010 Property/Casualty Insurers' Year‐End 2009 review, 17 March 2010 2010 Rating Outlook Negative for U.S. Life Insurance Sector”, 20 January 2010 Reinsurance Outlook Revised to Stable", 11 November 2009 Insurance Industry Rating Outlooks: Global Update, 2 September 2009

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Corporate
· · · · · · · · · · · · European Leveraged Credit Review ‐ Diverging Fortunes Set to Continue, 13 May 2010 The ‘B‐’/‘CCC’ Debate, 12 May 2010 Cross‐over Corporate Issuers – Cliffhangers, 6 May 2010 U.S. Corporate Capital Expenditure Study, 4 May 2010 $150 per Barrel Crude Oil: Credit Implications across the Corporate Sector, 3 May 2010 EMEA Corporate Portfolio: Spring 2010 Updated ‐ Delicate Stabilisation, 28 April 2010 Weak Emerging Market Insolvency Regimes Drive Caution, 19 April 2010 Short‐Term Memory Loss: Corporate Issuers Taking Calculated Risks with Committed Credit Facilities , 25 March 2010 EMEA industrial: 2010 Outlook, 24 February 2010 Senior Secured Bond Issuance: Buys Time, but may not Solve the Problem of Leverage, 18 February 2010 Forecasting EMEA Corporates' Recovery: The Slow Haul Back, 14 December 2009 Stabilising Corporate Ratings in Europe and Asia‐Pacific, 14 October 2009

Global Infrastructure and Project Finance
· · · · · · Airline Consolidations in a Recovering Economy: Will It Be Beneficial for U.S. Airports? , 28 April 2010 High Speed Rail Projects: Large, Varied and Complex , 6 April 2010 Indian Infrastructure Outlook 2010, 4 March 2010 Australian Infrastructure & Project Finance Outlook 2010: An Expanding State of Play, 3 March 2010 Latin American Infrastructure & Project Finance 2010 Outlook, 2 March 2010 Global Infrastructure & Project Finance 2010 Outlook, 1 March 2010

Structured Finance
· · · · · · · · · · · · · · The Role of the ECB in Structured Finance, 13 May 2010 EMEA ABS Sector Outlook — April 2010, 27 April 2010 EMEA RMBS Sector Outlook — April 2010, 27 April 2010 EMEA CMBS Sector Outlook — April 2010, 27 April 2010 EMEA Structured Credit Sector Outlook — April 2010, 27 April 2010 U.S. CMBS 2009 Default Study: Cumulative Defaults Doubled in 2009, 21 April 2010 EMEA Structured Finance Sector Outlook – April 2010, 20 April 2010 Fitch Bank TruPS CDO Default and Deferral Index, 15 April 2010 2010 Outlook for Global ABCP , 5 April 2010 Fitch Ratings Global Structured Finance 2009 Transition and Default Study , 26 March 2010 Japanese Structured Finance: 2009 Review and 2010 Outlook, 9 February 2010 Australian 2010 Structured Finance Outlook, 2 February 2010 2010 Non‐Japan Structured Finance Outlook, 12 January 2010 U.S. Structured Finance: 2010 Outlook, 8 December 2009

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