According to a new report from Fitch Ratings, the Bank of Canada’s recent proposals to accept certain asset-backed commercial paper as collateral will help add sorely needed liquidity to the ABCP market, which is a positive development. But, it adds that the proposals do contain some ambiguities that are important to understand.

Fitch notes that the Bank of Canada began soliciting feedback in early March on its proposed eligibility criteria for accepting ABCP as collateral for borrowings under its Standing Liquidity Facility. With additional results expected by June, the bank’s attempts to promote minimum acceptable standards of disclosure and transparency should benefit all market participants, the rating agency says.

It adds that the Bank’s requirement that eligible ABCP have a minimum of two credit ratings, “is a constructive move as it will result in greater transparency, and provide investors a wider array of opinions, greater information availability and increased analyst accessibility.”

Now that the majority of Canadian bank-sponsored ABCP programs have converted to global style liquidity standards, they are eligible for rating consideration by Fitch. However, it stresses that it is important for investors, regulators, and other market participants to understand that rating agencies’ short-term rating scales are not identical—notably, programs that achieve the highest rating from other agencies would not necessarily qualify for one from Fitch.