Select Committee on Treasury Written Evidence


Annex 1

MEANING OF MOODY'S RATINGS

MOODY'S LONG-TERM RATING SCALE


AaaJudged to be of the highest quality, with minimal credit risk.
AaJudged to be of high quality and are subject to very low credit risk.
AConsidered upper-medium grade and are subject to low credit risk.
BaaSubject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics.
BaJudged to have speculative elements and are subject to substantial credit risk.
BConsidered speculative and are subject to high credit risk.
CaaJudged to be of poor standing and are subject to very high credit risk.
CaHighly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
CLowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

WATCHLIST

  Moody's uses the Watchlist to indicate that a rating is under review for possible change in the short-term. A rating can be placed on review for possible upgrade (UPG), on review for possible downgrade (DNG), or more rarely with direction uncertain (UNC). A credit is removed from the Watchlist when the rating is upgraded, downgraded or confirmed.

BANK FINANCIAL STRENGTH RATING DEFINITIONS


A  Banks rated A possess superior intrinsic financial strength. Typically, they will be institutions with highly valuable and defensible business franchises, strong financial fundamentals, and a very predictable and stable operating environment.
BBanks rated B possess strong intrinsic financial strength. Typically, they will be institutions with valuable and defensible business franchises, good financial fundamentals, and a predictable and stable operating environment.
CBanks rated C possess adequate intrinsic financial strength. Typically, they will be institutions with more limited but still valuable business franchises. These banks will display either acceptable financial fundamentals within a predictable and stable operating environment, or good financial fundamentals within a less predictable and stable operating environment.
DBanks rated D display modest intrinsic financial strength, potentially requiring some outside support at times. Such institutions may be limited by one or more of the following factors: a weak business franchise; financial fundamentals that are deficient in one or more respects; or an unpredictable and unstable operating environment.
EBanks rated E display very modest intrinsic financial strength, with a higher likelihood of periodic outside support or an eventual need for outside assistance. Such institutions may be limited by one or more of the following factors: a weak and limited business franchise; financial fundamentals that are materially deficient in one or more respects; or a highly unpredictable or unstable operating environment.

Note:Where appropriate, a "+" modifier will be appended to ratings below the "A" category and a "-" modifier will be appended to ratings above the "E" category to distinguish those banks that fall in the higher and lower ends, respectively, of the generic rating category.







 
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Prepared 1 February 2008