ARROW GLOBAL GROUP PLC
Fitch Ratings has affirmed
A full list of rating details follows:
RATING ACTIONS
Entity / Debt
Rating
Prior
Vesting Finance Servicing B.V.
ABS Primary Servicer
ABPS2
Affirmed
ABPS2
ABS Special Servicer
ABSS2
Affirmed
ABSS2
RMBS Primary Servicer
RPS2
Affirmed
RPS2
RMBS Special Servicer
RSS2
Affirmed
RSS2
Page
of 1
VIEW ADDITIONAL RATING DETAILS
Key Rating Drivers
Vesting Finance Servicing B.V. is owned by
Vesting is the group's preferred servicer for its investments in
Since Fitch's previous review, due to the changes in the group's strategy and as part of Vesting's talent-retention programme, the senior management team was restructured, with many of the middle managers present at the previous review moving into the senior management roles. Furthermore, at the cut-off date for this review only three of the nine senior managers at the 2020 review remain in the senior management team, which implies an average annualised turnover of the senior and middle management team that is commensurate with the '4' rating category.
Changes at management level also occurred at previous review in 2020, when all but one of the senior managers at the 2018 review had left the company, while the one remaining senior manager was serving their notice period and has since left the company. In Fitch's view, long-term engagement of the senior management team provides the company with stability and clear direction. The review on review changes at management level have led Fitch to affirm the ratings of Vesting Finance. Future upward movements in ratings will depend on the stability of the management teams, as well as the company's business strategy.
Vesting has 104 operational staff, whose average industry experience is commensurate with the '1' rating category across both asset types. When reviewing staff performance, Vesting has a talent review programme with which it assesses employees' performance and suitability for development into new roles. Progress assessments are part of the performance management cycle and embedded in Vesting's talent density programme, which is also used in recruitment, training and staffing. The implementation of the talent density programme and subsequent improvements in the succession planning limit key-person risk and have led to improved scores of the relevant sections of our scoring matrices.
Vesting operates a three-lines-of-defence risk governance framework, which remains commensurate to the '1' rating category. The first line includes two-person checks, file reviews and call quality assessments carried out by the operational teams and supported by the dedicated quality control officer. The servicer has both group policies and local, entity-level policies. However, none of the group polices have been reviewed since 2Q21 as Arrow was undergoing a takeover. At the start of 4Q21 Arrow started updating policies and therefore not all group policies have been reviewed annually, leading to the worsening of the relevant score in our matrices.
The governance, risk and compliance (GRC) team, the second line of defence, carries out risk assessments, and continuously monitors and evaluates legal and regulatory changes and emerging risks. As part of the group restructure and subsequent decentralisation of some support functions, Vesting has a local head of GRC who reports to
The third line consists of a risk-based annual internal audit programme. The internal audit team continues to report into the group; however, as at the data cut-off date Vesting was recruiting a dedicated internal auditor, who will be responsible for Vesting's internal audits. In the meantime, audit activities continue to be provided by the group. Fitch has seen the audit reports, which have no high-risk findings, leading to improved scores of the relevant sections of our scoring matrices. Vesting is also subject to an ISAE 3402 Type II certification third-party audit and audits of its financial accounts.
Vesting's new loan set-up process is deemed to be efficient as the process is highly automated and uses pre-defined templates. Loan accounting processes include electronic reconciliations and payment allocation. There is an appropriate segregation of duties and approvals for all payment disbursements. Vesting's reporting is fully automated and uses pre-agreed templates; however, in the 12 months to the cut-off date there were 12 late reports, leading Fitch to worsen the relevant scores. The late reports mostly related to late or incorrect data delivered by the supplier. The procedure has been discussed with the supplier to ensure the issue does not persist.
Vesting uses a variety of resolutions methods in its special servicing activities and demonstrates proactive monitoring of loan performance and borrower affordability. Loan strategy reports are less automated than is seen at rated servicers in the '1' rating category; however, appropriate controls are in place. Disclosures of key information, such as changes to resolution method, valuation, borrower status (i.e. deceased) and costs, are issued in line with the service level agreements' reporting requirements and therefore notifications vary, leading to some score improvements in Fitch's scoring matrices.
Vesting has good business continuity procedures and disaster recovery plans, which were tested in
Vesting uses the Close servicing system, which is integrated with its borrower portal and other key proprietary systems. There is good automation in boarding, payment reconciliations and reporting; however, the current level of automation is less advanced than at some other Fitch-rated servicers. In line with its strategy to improve operational efficiency and optimise its processes, the servicer continues to increase automation of its activities, which are expected to reduce operational risk. For this reason, Fitch has assigned a Positive Outlook to all four ratings.
As of
This rating action commentary is based on information provided to Fitch as of
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
Criteria for Rating Loan Servicers (pub.
ADDITIONAL DISCLOSURES
Solicitation Status
Endorsement Policy
ENDORSEMENT STATUS
Vesting Finance Servicing B.V. -
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