European rating agency. Objective, transparent, independent.
European rating agency. Objective, transparent, independent.

Banks

Besides traditional corporate and issue ratings, Creditreform Rating offers ratings of banks and their issues of covered and uncovered bonds.

Both banks themselves and investors commission ratings. Our ratings are used to evaluate investment portfolios or issuers, which are analyzed by our qualified analysts. In addition, we also prepare unsolicited bank ratings.

What is a bank rating?

Creditreform Rating's bank rating is based on the fundamental question of the creditworthiness of the bank and whether it will be able to meet its contractual obligations arising from financing instruments in full and on time - short-term in the short-term issuer rating, long-term in the long-term issuer rating. A bank's intrinsic financial strength or "stand-alone" ability is primarily decisive for its ability to repay debt. The bank must therefore be in a position to generate future cash surpluses from operating activities in its market environment and continuously possess sufficient liquidity. Determining this ability is a key focus of the analysis. Building on this, and taking possible additional credit risks into account, an analysis is conducted to determine the extent to which possible supportive factors from third parties can still influence the "stand-alone" rating. The overall analysis result is then used to derive the final issuer rating for a specific bank.

How are covered bonds rated?

The rating of covered bonds (Pfandbriefe) and similar structured covered bonds includes quantitative and qualitative analysis methods. The covered bond rating is based on the analysis of the issuer. The degree of protection provided by legal and regulatory measures is reflected in the "primary uplift" of up to six notches above the issuer rating. A valuation system is used to determine the strengths and weaknesses of the relevant legal framework in terms of structural risks and effectiveness in mitigating liquidity and refinancing risks. Afterwards, the quality of the collateral and the cover pool is reviewed and a "secondary uplift" of up to three notches added to the "primary uplift" is determined. The rating classes and the associated stress factors and multiples relevant for assessing the credit and portfolio risk and our cash flow model are determined in relation to the intermediary covered bond rating, including the primary uplift.

The final rating includes and considers our assessment of the counterparty risks relevant to the transaction and is subject to the decision of a rating committee, to whom the analysts present the results of the rating process.

How are bank capital and unsecured bank issues rated?

Ratings of bank capital and unsecured promissory notes (Bank Capital Rating and Unsecured Debt Instruments Rating) have a modular structure. The ratings are based on the long-term issuer rating of the respective bank. Based on this, additional criteria are taken into account, each of which can lead to an uplift or downgrade of a particular instrument class. These are essentially factors such as the bail-in cascade in accordance with the BRRD (Bank Recovery and Resolution Directive), the type of instrument class and the structure of the liabilities. In the case of a bank rating, a rating for bank capital and unsecured debt instruments can be provided at the same time, optionally also for certain issues.