OREANDA-NEWS. Fitch Ratings has upgraded CBRE Loan Services Limited's (CBRE; formerly CBRE Loan Servicing) UK Commercial Primary Servicer Rating to 'CPS2+' from 'CPS2', and removed the rating from Rating Watch Positive (RWP).

The rating was placed on RPW in June 2016 due to material feedback Fitch received from the servicer regarding procedures and controls and third-party audits carried out at CBRE Group (CBG) and CBRE.

The upgrade reflects Fitch's full assessment of the audits which the servicer is subject to. As of 2015, the servicer had no high risk findings reported.

Unlike other rated UK servicers CBRE does not have an internal audit (IA) function. Firstline reviews are carried out by CBRE and the CBG compliance function provides an objective second line review. Third-line audits are completed by multiple third-party auditors, as part of the group's ISO9001 and ISO27001 certification, and also audits carried out at the request of servicing clients. Reviews are carried out in a structured and standardised manner, with formal feedback channels.

Typically Fitch does not give credit to client-driven audits, as generally the scope of such reviews is narrow and limited feedback is provided to the servicer. However, CBRE has shown a client-driven audit process which is thorough, covers a variety of operational risk areas and includes a formal feedback process to address any findings or recommendations. As of August 2016 CBRE is subject to six separate client audits, which are conducted on an annual or twice yearly basis. The servicer has demonstrated operational improvements, which were triggered by client audits. The agency has, therefore, taken these audits into consideration when assessing the servicer rating.

CBG is subject to annual audits by KPMG to ensure Sarbanes-Oxley (SOX) compliance. Although this does not involve an in-depth review of the servicer's operations, it is a further independent assessment of the financial controls.

Fitch generally views IA as a key part of effective risk management. However, the current framework at CBRE is appropriate and provides regular independent assessment of the controls in place at the servicer. A change to the structure, frequency or scope of the audit activities would lead Fitch to reassess their effects on the rating.

As of end-2015, CBRE acted as primary servicer on 241 UK loans (2014: 219), with a value of GBP10.5bn (2014:GBP10.2bn) and as special servicer on three UK loans (2014: three), with a value of GBP903m (2014: GBP903m). CBRE also acted as servicer on 94 non UK loans (2014: 61), with a value of EUR7.7bn (2014: EUR7.5bn).

The servicer rating is based on the methodology described in 'Rating Criteria for Structured Finance Servicers' dated 1 July 2016, which includes a comparison of similar UK servicers as part of the review.