These additional factors are typically qualitative in nature, although in some cases our assessments may be informed by certain quantitative indicators. Qualitative considerations: There are occasionally other bank-specific considerations that we believe can influence core fundamentals. Liquid resources are enhanced when a bank has high-quality liquid assets that can both be readily sold or pledged for cash in private markets in response to its funding counterparts' changing behavior, or that can in extremis be repoed with central banks under standard terms.
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Liquid resources: to provide a full picture of liquidity, an assessment of the funding structure of a bank has to be viewed in the context of the composition of its assets.
A bank that makes significant use of an unreliable funding source perhaps short-term in nature, or from particularly risk-sensitive counterparties is more likely to suffer periodic difficulties in refinancing its debt, putting it at greater risk of needing support. A bank with weak or negative profitability has less ability to absorb asset risks than one with strong internal capital generation capacity, other things being equal.įunding Structure: a bank's funding structure has a strong bearing on its probability of failure or requiring assistance, because some sources of funds are less reliable than others. Profitability: profitability is an important indicator of an institution's ability to generate capital, and is hence another measure of its ability to absorb losses and recover from shocks. The greater the risk of unexpected loss, the more capital a bank needs to hold in order to retain the confidence of creditors, which enables the bank to fund itself and to shield bondholders from loss. Asset risk includes a bank's other assets as well may also be vulnerable to other non-lending risk including market risk and operational risk.Ĭapital: asset risk and the need for capital go hand in hand. Credit quality problems are typically at the root of most bank failures, even though these problems can take a variety of forms, for example a deteriorating value of the loan collateral, resulting in higher losses.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.Īsset Risk: a bank's asset risk is fundamental to creditworthiness because banks have high leverage, which implies that a small deterioration in asset value has a large effect on solvency. Please see the Rating Methodologies page on for a copy of this methodology. The principal methodology used for this review was Banks Methodology published in July 2021.
Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
The review was conducted through a portfolio review discussion held on 18 July 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. New York, J- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
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