Bangkok--20 Oct--Moody's
Moody's Investors Service announced today that it would delay implementation of proposed revisions to its bank
rating methodology in order to allow more time to review comments received to date, refine its proposals, and solicit further feedback from market participants.
The rating agency said it received a large number of responses from market participants following its September 2006 request for comment on a proposed Revised Methodology for Bank Financial Strength Ratings (BFSRs).
An important input into Moody's bank debt and deposit ratings, Moody's BFSR is an opinion of the relative stand-alone financial strength of a bank without reference to external support factors. However, the BFSR is not the sole determinant of those ratings because many banks also benefit from external support that strengthens the bank's credit risk profile and
reduces the risk of default for bank depositors and bondholders. That support will be captured by Moody's via the incorporation of Joint-Default Analysis (JDA) into its bank debt and deposit ratings.
"Most of the comments we received were supportive of our efforts to improve the transparency of our rating methodology," said David Fanger, Moody's Chief Credit Officer for Financial Institutions. "Many of the responses also raised specific questions about the proposed BFSR scorecard which accompanied the request for comment," Fanger said, "and
offered a variety of suggestions on ways in which the scorecard could be improved."
In response to these comments, Moody's anticipates making changes to the proposed BFSR scorecard. The rating agency will also provide further clarification on how the scorecard will be used by analysts and in rating committees. In order to provide market participants sufficient opportunity to review these changes and clarifications, Moody's will publish a second request for comment on the revised BFSR methodology.
Moody's intends to publish this second request for comment by early November 2006, together with answers to frequently asked questions about both Moody's BFSRs and Moody's proposed incorporation of Joint-Default
Analysis (JDA) into its assessment of external support for banks.
"The issuance of another request for comment will delay publication and implementation of the final revised BFSR methodology, together with the final JDA methodology for banks, until the first quarter of 2007," Fanger said. "This will give market participants time to evaluate any additional changes to the proposed methodology, and to fully understand the role of the BFSR scorecard in the ratings process. We look forward to continuing our dialog with market participants on this subject."
New York
David Fanger
Chief Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Laura Levenstein
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653