Announcements Criteria

GCR Requests Public Comment on Draft Criteria for Rating Financial Institutions, Financial Services

Download – Request for Comment Criteria for Rating Financial Institutions
Download – Request for Comment Criteria for Rating Financial Services Companies
Download – Request for Comment Criteria for Rating Supranationals

Johannesburg, 28 March 2019: GCR has published three draft criteria for rating financial institutions, financial services companies and supranational institutions.

 

The following reports are open to public comment until the 30th April 2019.

  1. Request for Comment: Criteria for Rating Financial Institutions,
  2. Request for Comment: Criteria for Rating Financial Services Companies,
  3. Request for Comment: Criteria for Rating Supranational Institutions.

 

The draft criteria include a summary of how they fit into the overarching GCR Ratings Framework, details of which were released on 12 March 2019 in an announcement titled “GCR Requests Public Comment on Draft Ratings Framework Criteria and Draft Ratings Definitions” (please click here for further details). Each of the criteria include a proposed scope and summary of key changes, together with a breakdown of how each of the components are to be assessed and scored.

 

  1. Request for Comment: Criteria for Rating Financial Institutions
  2.  

    The draft criteria has retained much of the fundamentals utilised in the previous GCR methodology (namely, Global Credit Rating Co. – Global Master Criteria for Rating Banks and Other Financial Institutions, last updated in March 2017). Of significance is the draft criteria’s alignment to the broader GCR Ratings Framework. Some of the specific changes introduced for analysing banks include incorporating resolution factors, where relevant, into the Capital & Leverage factor and the inclusion of specific key ratios such as the GCR core capital and financial leverage ratios. Additionally, the draft criteria introduces a foundation for rating debt instruments.

     

    GCR anticipates a modest impact on the ratings of rated banks and bank-like entities, if the proposed draft criteria is adopted.

     

  3. Request for Comment: Criteria for Rating Financial Services Companies
  4.  

    GCR introduces the draft Criteria for Rating Financial Services Companies, representing a new approach to the analysis of financial services companies. As a result, GCR will be retiring the ‘Global Criteria for Rating Finance and Leasing Companies’ and ‘Global Criteria for Rating Microfinance Institutions’, having been last updated in March 2017.

     

    Entities previously rated under these retiring criteria shall be assessed under either the ‘Draft Financial Services Companies Criteria’, or the ‘Draft Financial Institutions Criteria’, which is primarily dependent on the nature of their operations and risks. GCR has also adopted a ratio-based analysis for leverage and cash flow assessments as opposed to measuring more ‘bank-like’ risks. Nevertheless, as in previous criteria, quantitative assessments are largely interpreted using qualitative factors.

     

    GCR anticipates a modest impact on the ratings of rated financial services entities, if the proposed draft criteria is adopted.

     

  5. Request for Comment: Criteria for Rating Supranational Institutions

 

Another introduction is the draft Criteria for Rating Supranational Institutions, which presents a material departure from the GCR criteria titled ‘Global Criteria for Rating Multilateral Development Banks, updated September 2017’. Significantly, there is an alignment to the broader GCR Ratings Framework, coupled with a widening of the application of the draft criteria to allow for the assessment of ‘bank-like’ and ‘insurance-like’ entities under one criteria.

 

The draft criteria will borrow heavily from other asset classes for elements of the operating environment and financial profile assessments. Furthermore, within the business profile component of the criteria, GCR observes the supranational entity’s status, mandate and track-record, while additional factors within the financial profile include an assessment of callable capital.

 

GCR anticipates a negligible impact on the ratings of rated multilateral development banks and insurers, if the draft criteria is adopted.

 

GCR invites comment on the draft criteria presented above and welcomes comments which may be sent to rfc@GCRratings.com, prior to the closing of the comment period on the 30th of April 2019. GCR will continue to support all ratings on existing methodologies until such time as the final criteria are adopted.

 

Analytical Contacts

 

Matthew Pirnie Marc Chadwick

Sector Head: Financial Institutions Ratings Chief Ratings Officer

+27 11 784 1771 +27 11 784 1771

Download – Request for Comment Criteria for Rating Financial Institutions
Download – Request for Comment Criteria for Rating Financial Services Companies
Download – Request for Comment Criteria for Rating Supranationals



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