Bank Financial Strength Ratings Essay

24969 WordsFeb 12, 2012100 Pages
Rating Methodology September 2006 Contact New York Phone 1.212.553.1653 David Fanger Rosemarie Conforte Jeanne Del Casino Greg Bauer Laura Levenstein London Lynn Exton Adel Satel Antonio Carballo Madrid 44.20.7772.5454 Maria Cabanyes Tokyo 34.91.310.14.54 81.3.5408.4000 Mutsuo Suzuki Yasunobu Doi Singapore Deborah Schuler Hong Kong 65.6398.8300 852.2916.1121 Jerry Chien Request for Comment Bank Financial Strength Ratings: Revised Methodology Summary This report details Moody’s proposal to revise our rating methodology for assigning Bank Financial Strength Ratings (BFSRs) globally.1 This revision does not change the main factors that Moody’s considers in rating banks. However, the revised approach provides a single, global methodology instead of separate methodologies for mature and developing markets. It also establishes specific ranges for each factor that relate to different rating categories. The updated methodology is intended to provide investors and issuers with a transparent set of guidelines allowing them to better understand our rating process and how we reach our decisions. To this end, we have developed a rating scorecard that uses a common set of globally available financial metrics together with key qualitative factors that Moody’s analysts consider critical in evaluating a bank’s intrinsic financial strength and specific weights for each factor. This scorecard will be used by Moody’s analysts as the first step in determining BFSRs. It should also enable investors and issuers to independently estimate a BFSR for most banks within two notches. This report describes the scorecard and discusses some of its limitations as well as some of the further adjustments that Moody’s analysts may employ in assigning BFSRs. The revised methodology is also intended to improve the consistency of Moody’s BFSRs. As previously

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