Fitch Ratings: Definitions of Ratings
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This document defines various credit ratings scales and terms used by Fitch Ratings. It outlines long-term and short-term international and national rating scales ranging from AAA to D. It also describes other ratings including recovery ratings, fund ratings, servicer ratings, and asset management ratings. Additional terms covered include rating watches, outlooks, and actions. The document provides definitions and notes on limitations and appropriate usage of the various ratings.
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Fitch Ratings: Definitions of Ratings
- 1. Definitions of Ratings and Other Forms of Opinion
- 2. UNDERSTANDING CREDIT RATINGS – LIMITATIONS AND USAGE ..............................................................................................4 A. CREDIT RATING SCALES...............................................................................................................................................6 SUMMARY OF PRIMARY SCALES........................................................................................................................................7 A.1 INTERNATIONAL ISSUER AND CREDIT RATING SCALES...............................................................................................9 A.2 RECOVERY RATINGS..............................................................................................................................................21 A.3. OTHER INTERNATIONAL CREDIT RATINGS ...............................................................................................................23 A.4 NATIONAL RATINGS ...............................................................................................................................................32 A.5 COUNTRY CEILINGS ...............................................................................................................................................38 A.6 ADDITIONAL USAGE OF PRIMARY CREDIT RATING SCALES ......................................................................................39 B. OTHER SPECIALIST RATING SCALES ..........................................................................................................................41 B.1 SERVICER RATINGS ...............................................................................................................................................41 B.2 FUND RATINGS ......................................................................................................................................................44 B.3 ASSET MANAGEMENT RATINGS ..............................................................................................................................53 C. OTHER FORMS OF OPINION.........................................................................................................................................55
- 3. D. RATING WATCHES AND RATING OUTLOOKS ................................................................................................................56 E. RATING ACTIONS .......................................................................................................................................................58
- 7. 1 Recalibration of U.S. Public Finance Ratings
- 9. AAA: Highest credit quality. AA: Very high credit quality. A: High credit quality. BBB: Good credit quality. BB: Speculative. B: Highly speculative.
- 10. CCC: Substantial credit risk. CC: Very high levels of credit risk. C: Exceptionally high levels of credit risk RD: Restricted default. D: Default. Note: The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-Term IDR category, or to Long-Term IDR categories below ‘B’.
- 11. Understanding Credit Ratings - Limitations and Usage
- 12. AAA: Highest credit quality. AA: Very high credit quality. A: High credit quality. BBB: Good credit quality. BB: Speculative. B: Highly speculative. CCC: Substantial credit risk. CC: Very high levels of credit risk. C: Exceptionally high levels of credit risk.
- 13. Note: The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ obligation rating category, or to corporate finance obligation ratings in the categories below ‘CCC’. The subscript ‘emr’ is appended to a rating to denote embedded market risk which is beyond the scope of the rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk. † Table of the Relationship between Performing and Non-performing Corporate Obligations in Low Speculative Grade (Recovery Ratings are discussed in section A.2) Obligation Rating Performing Obligation Non-performing Obligation
- 14. Understanding Credit Ratings - Limitations and Usage
- 15. AAA: Highest credit quality. AA: Very high credit quality. A: High credit quality. BBB: Good credit quality. BB: Speculative. B: Highly speculative. CCC: Substantial credit risk. CC: Very high levels of credit risk. C: Exceptionally high levels of credit risk. D: Default.
- 16. Structured Finance Defaults Structured Finance Write-downs Notes: In the case of structured and project finance, while the ratings do not address the loss severity given default of the rated liability, loss severity assumptions on the underlying assets are nonetheless typically included as part of the analysis. Loss severity assumptions are used to derive pool cash flows available to service the rated liability. The suffix ‘sf’’ denotes an issue that is a structured finance transaction. For an explanation of how Fitch determines structured finance ratings, please see our criteria available at www.Fitchratings.com. In the case of public finance, the ratings do not address the loss given default of the rated liability, focusing instead on the vulnerability to default of the rated liability. The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-Term Rating category, or categories below ‘B’. Enhanced Equipment Trust Certificates (EETCs) are corporate-structured hybrid debt securities that airlines typically use to finance aircraft equipment. Due to the hybrid characteristics of these bonds, Fitch’s rating approach incorporates elements of both the structured finance and corporate rating methodologies. Although rated as asset-backed securities, unlike other structured finance ratings, EETC ratings involve a measure of recovery given default akin to ratings of financial obligations in corporate finance, as described in paragraph A.1.1.2.
- 17. Understanding Credit Ratings - Limitations and Usage
- 18. F1: Highest short-term credit quality. F2: Good short-term credit quality. F3: Fair short-term credit quality. B: Speculative short-term credit quality. C: High short-term default risk. RD: Restricted default. D: Default. Understanding Credit Ratings - Limitations and Usage
- 19. Short-Term Ratings Criteria for Corporate Finance Rating Municipal Short-term Debt
- 20. Long-Term Rating Short-Term Rating
- 21. RR1: Outstanding recovery prospects given default RR2: Superior recovery prospects given default RR3: Good recovery prospects given default RR4: Average recovery prospects given default RR5: Below average recovery prospects given default RR6: Poor recovery prospects given default
- 22. Understanding Credit Ratings - Limitations and Usage
- 23. The Purpose and Function of Support Ratings Timeliness and Effectiveness Requirements Obligations and Financial Instruments Covered Definitions: 1: 2: 3:
- 25. aaa aa a bbb bb
- 26. b ccc cc c f s within major rating categories. Such suffixes are not added to the ‘aaa’ VR category or to VR categories below ‘b’. Outlooks are not assigned to VRs although at any point in time, a bank’s position and prospects may have underlying trends, for example improving, deteriorating or stable. A: B: C:
- 27. D: E: F: Note: Gradations may have been used among the ratings A to E: i.e. A/B, B/C, C/D, and D/E. No gradations applied to the F rating.
- 29. AAA: Exceptionally strong. AA: Very strong. A: Strong. BBB: Good. BB: Moderately weak. B: Weak. CCC: Very weak. CC: Extremely weak.
- 30. C: Distressed Notes: “+” or “-” may be appended to a rating to indicate the relative position of a credit within the rating category. Such suffixes are not added to ratings in the ‘AAA’ category or to ratings below the ‘B’ category.
- 31. F1 F2 F3 B C
- 32. Understanding Credit Ratings - Limitations and Usage
- 33. AAA(xxx) AA(xxx) A(xxx) BBB(xxx) BB(xxx) B(xxx) CCC(xxx) CC(xxx) C(xxx) RD(xxx): Restricted default.
- 34. D(xxx)
- 35. F1(xxx) F2(xxx) F3(xxx) B(xxx) C(xxx) RD(xxx): Restricted default. D (xxx) Notes to Long-Term and Short-Term National Ratings: The ISO International Country Code is placed in parentheses immediately following the rating letters to indicate the identity of the National market within which the rating applies. For illustrative purposes, (xxx) has been used. “+” or “-” may be appended to a National Rating to denote relative status within a major rating category. Such suffixes are not added to the ‘AAA(xxx)’ Long-Term National Rating category, to categories below ‘CCC(xxx)’, or to Short-Term National Ratings other than ‘F1(xxx)’.
- 37. CC(xxx) ‘C’(xxx) Notes: “+” or “-” are used with a rating symbol to indicate the relative position of a credit within the rating category. They are not used for the ‘AAA’ category or for ratings below the ‘CCC’ category. The ISO International Code is placed in parentheses immediately following the rating letters to indicate the identity of the National market within which the rating applies. For illustrative purposes, (xxx) has been used.
- 41. Rating Definitions Level 1 Servicer Rating (ABPS1, ABMS1, ABSS1, CPS1, CMS1, CSS1, CCLS1, CLLSS1, RPS1, RMS1, RSS1, SBPS1, SBSS1) Level 2 Servicer Rating (ABPS2, ABMS2, ABSS2, CPS2, CMS2, CSS2, CCLS2, CLLSS2, RPS2, RMS2, RSS2, SBPS2, SBSS2) Level 3 Servicer Rating (ABPS3, ABMS3, ABSS3, CPS3, CMS3, CSS3, CCLS3, CLLSS3, RPS3, RMS3, RSS3, SBPS3, SBSS3)
- 42. Level 4 Servicer Rating (ABPS4, ABMS4, ABSS4, CPS4, CMS4, CSS4, CCLS4, CLLSS4, RPS4, RMS4, RSS4, SBPS4, SBSS4) Level 5 Servicer Rating (ABPS5, ABMS5, ABSS5, CPS5, CMS5, CSS5, CCLS5, CLLSS5, RMS5, RPS5, RSS5, SBPS5, SBSS5)
- 44. Understanding Credit Ratings - Limitations and Usage
- 46. Understanding Credit Ratings - Limitations and Usage
- 47. AAAmmf: AAmmf: Ammf: BBBmmf BBmmf Bmmf Understanding Credit Ratings - Limitations and Usage
- 52. Understanding Credit Ratings - Limitations and Usage
- 53. Asset Manager Rating Scale (International) AM Rating Scale AM Rating Definitions Source: Fitch Understanding Credit Ratings – Limitations and Usage
- 54. Asset Manager Rating Scale (National) AM Rating Scale AM Rating Definitions
- 58. Standard Rating Actions, Rating Modifiers, Data Actions, Historical Actions Affirmed* Confirmed Downgrade* Matured*/Paid-In-Full New Rating* Prerefunded * Publish* . Upgrade* Withdrawn* Rating Modifier Actions
- 59. Rating Watch Maintained* Rating Watch On* Rating Watch Revision* Support Floor Rating Revision Under Review* The Following Actions Will Only Apply in Structured Finance Transactions. Revision Outlook *A rating action must be recorded for each rating in a required cycle to be considered compliant with Fitch policy concerning aging of ratings. Not all Ratings or Data Actions, or changes in rating modifiers, will meet this requirement. Actions that meet this requirement are noted with an * in the above definitions. E.1.2. Data Actions Revision Enhancement Revision IDR Revision Rating E.1.3 Historical Actions
- 60. Change Database Add Distressed Recovery Rating Revision Bank Individual Ratings Loss Severity Rating Revision Recovery Rating Revision Revision MMF Revision Outlook Withdrawn – Prerefunded