Response to consultation on amending ITS on the mapping of credit assessments of ECAIs for credit risk
Go back
Fitch Ratings believes that it would be both appropriate and beneficial to EU bank users of Fitch Ratings’ bank ratings, if the mapping tables contained in Annex III of the Implementing Technical Standards were updated to include Fitch Ratings’ ‘ex-government support’ , or ‘xgs’, ratings alongside the corresponding underlying rating scales. An example updated mapping table is shown in Appendix 1 of this document.
In light of the final Basel III “endgame” prudential standard (December 2017) and the European Commission’s proposals dated 27 October 2021 to amend Regulation (EU) No 575/2013 Capital Requirements Regulation (CRR), Fitch Ratings published final criteria titled Bank Ex-Government Support Ratings Criteria on 11 April 2023 and has since completed the initial roll-out of ‘xgs’ ratings.
In cases where a non-policy bank’s ratings incorporate assumptions of implicit extraordinary government support, the bank’s ‘xgs’ ratings, where assigned, provide EU bank users with a measure of a bank’s credit worthiness, on the same scale as the underlying Fitch credit ratings, but excluding the impact of extraordinary government support.
Therefore, the inclusion of ‘xgs’ ratings within the mapping tables at this point would assist EU bank users in preparing for the above anticipated amendment to the CRR.
In addition, Fitch Rating highlights that derivative counterparty ratings are assigned to selected financial institutions on the same scale as long-term issuer default ratings. Derivative counterparty ratings may be assigned at the level of ‘RD(dcr)’ or ‘D(dcr)’, which is not reflected in the current mapping table. Therefore, as shown in Appendix 1 of this document, Fitch Ratings suggests to add ‘RD(dcr)’ and ‘D(dcr)’ to the mapping table consistent with the long-term issuer default rating scale.
Please let us know if you require further information.
Do you agree with the proposed revised draft Implementing Technical Standard?
On behalf of Fitch Ratings Ireland Limited (Fitch Ratings)Fitch Ratings believes that it would be both appropriate and beneficial to EU bank users of Fitch Ratings’ bank ratings, if the mapping tables contained in Annex III of the Implementing Technical Standards were updated to include Fitch Ratings’ ‘ex-government support’ , or ‘xgs’, ratings alongside the corresponding underlying rating scales. An example updated mapping table is shown in Appendix 1 of this document.
In light of the final Basel III “endgame” prudential standard (December 2017) and the European Commission’s proposals dated 27 October 2021 to amend Regulation (EU) No 575/2013 Capital Requirements Regulation (CRR), Fitch Ratings published final criteria titled Bank Ex-Government Support Ratings Criteria on 11 April 2023 and has since completed the initial roll-out of ‘xgs’ ratings.
In cases where a non-policy bank’s ratings incorporate assumptions of implicit extraordinary government support, the bank’s ‘xgs’ ratings, where assigned, provide EU bank users with a measure of a bank’s credit worthiness, on the same scale as the underlying Fitch credit ratings, but excluding the impact of extraordinary government support.
Therefore, the inclusion of ‘xgs’ ratings within the mapping tables at this point would assist EU bank users in preparing for the above anticipated amendment to the CRR.
In addition, Fitch Rating highlights that derivative counterparty ratings are assigned to selected financial institutions on the same scale as long-term issuer default ratings. Derivative counterparty ratings may be assigned at the level of ‘RD(dcr)’ or ‘D(dcr)’, which is not reflected in the current mapping table. Therefore, as shown in Appendix 1 of this document, Fitch Ratings suggests to add ‘RD(dcr)’ and ‘D(dcr)’ to the mapping table consistent with the long-term issuer default rating scale.
Please let us know if you require further information.