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Introduction to Rating Methodologies

Introduction to Rating Methodologies. Caribbean Information & Credit Rating Services Limited. Presentation Structure. CariCRIS Rating Scheme CariCRIS Rating Methodologies. Credit Rating - some fundamentals. A c redit rating is a current opinion on the relative creditworthiness of debt

robert-contreras
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Introduction to Rating Methodologies

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  1. Introduction toRating Methodologies Caribbean Information & Credit Rating Services Limited

  2. Presentation Structure • CariCRIS Rating Scheme • CariCRIS Rating Methodologies

  3. Credit Rating- some fundamentals • A credit rating is a current opinion on the relative creditworthiness of debt • Ratings are: • Always relative • Within a defined frame of reference • Ratings Frames of Reference can be: • Global • National • Regional

  4. CariCRIS–Rating Products • Regional Scale Ratings • Opinion on creditworthiness relative to other entities in a defined Caribbean region • Foreign currency ratings • Local currency ratings • National Scale Ratings • Opinion on creditworthiness relative to other entities within a specific nation • Local currency ratings

  5. ABC (T&T) Ltd XYZ (J’ca) Ltd Regional ScaleForeign Currency US$ US$ ABC (T&T) Ltd XYZ (J’ca) Ltd Regional ScaleLocal Currency TT$ J$ ABC (T&T) Ltd PQR (T&T) Ltd National ScaleLocal Currency TT$ TT$ Illustration You want to compare … Use …

  6. CariCRIS Rating Scale

  7. Debt/Notional debt issued by: Sovereigns Manufacturing/ Service companies Statutory Bodies/Public Sector Companies Financial institutions & Banks Finance Companies Credit Unions Holding Companies Insurance Companies Mutual Funds Such as: Bonds Bank Deposits Commercial Paper Term Loans Preference shares Secured debt Unsecured debt Mortgage backed securities Asset backed securities Structured obligations What can be rated? CariCRIS will primarily assign issue specific ratings.

  8. CariCRIS Assessment Framework for Sovereign Entities Fiscal Policy Income & Economic Structure Monetary & Exchange Rate Policy CREDIT RATING Political Environment Balance of Payments & External Liquidity

  9. CariCRIS Assessment Framework - Sovereigns

  10. Economy Risk Management Risk Industry Risk Credit Risk Business Risk Market Position Operating Efficiency Project Risk CariCRIS Assessment Framework for Manufacturing and Service Entities Financial Risk

  11. INDUSTRY RISK BUSINESS RISK FINANCIAL RISK MANAGEMENT RISK PROJECT RISK IndustryCharacteristics OperatingEfficiency AccountingQuality TrackRecord Construction / Stabilisation Risk Competition within industry Market Position Past Financials Financial Conservatism Post Implementation Risk Industry Financials Financial Flexibility Attitude to Risk Future Cash Flow Adequacy Payment Record Optional Parameters CariCRIS Assessment Framework for Manufacturing and Service Entities Risk Categories Risk Parameters

  12. Parent Support Moral Obligation Parent’s Credit Quality Economic Rationale Parent Support Final Credit Rating Stand- Alone Credit Rating

  13. RESOURCES CAPITAL ADEQUACY ASSET QUALITY CREDIT RATING LIQUIDITY / ALM MANAGEMENT EARNINGS CariCRIS Assessment Framework for Banks & Finance Entities The CRAMEL framework

  14. CariCRIS Assessment Framework for Banks & Finance Entities

  15. CariCRIS Assessment Framework for Life & Non-life Insurance companies Management Risk Industry Risk FSR / Credit rating Business Risk Market Position Financial Risk Parent Support

  16. CariCRIS Assessment Framework for Life & Non-life Insurance companies

  17. THANK YOU Caribbean Information & Credit Rating Services Limited info@caricris.com / www.caricris.com Tel: (868) 627-8879 Fax: (868) 625-8871

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