Higher Ratings Show Lower Default Rates and Greater Stability
The performance of our corporate ratings (defined broadly to include banks, NBFIs, insurers and non-financial corporates) has been strong over time. Transition matrices show a high level of ratings stability for time horizons up to five years. Higher rated entities are more stable than lower rated entities and investment grade ratings are more stable than those in the speculative grades.
Our ability to rank rated entities on the basis of credit risk (so the lower the rating, the greater the frequency of default) is also high – as verified by the accuracy ratio measure of discriminatory power (a regulator required quantitative performance metric).
The latest performance data can be found here
All credit ratings issued by CI Ratings are also reported to the European Securities and Markets Authority (ESMA) on an ongoing basis, enabling ESMA to use supervisory tools to monitor performance. ESMA’s central data repository (CEREP) also allows public access to ratings data for the computation of transition rates and defaults rates. Historical performance data can be found at:
https://registers.esma.europa.eu/cerep-publication
Same EU Mapping to Risk Weights as Global Rating Agencies
As an External Credit Assessment Institution (ECAI) in the EU, CI’s rating performance has also been examined independently by EU regulators in the context of bank and insurer capital frameworks. EU regulators have mapped our credit ratings to risk weights that may be used by financial institutions to establish the level of capital they should hold against credit risk.
The methodology for determining the interaction between credit ratings and risk weights, via so-called ‘credit quality steps’, was developed by the Joint Committee of the European Banking Authority (EBA), ESMA, and the European Insurance and Occupational Pensions Authority (EIOPA).
Reassuringly for users of our ratings, the mapping established for CI Ratings by EU regulators is precisely the same as that assigned to Moody’s, Fitch and S&P for all rating categories. Mappings, which are based on detailed quantitative and qualitative criteria, are monitored by the EBA and subject to periodic review.