EBA欧洲银行-28Mapping-Report-Kroll29_17页_428kb

Summary of Kroll Bond Rating Agency (KBRA) Credit Assessments Mapping under the Standardised Approach

Core Content

This report outlines the mapping of credit assessments from Kroll Bond Rating Agency (KBRA) and its European subsidiary, KBRA Europe Limited, under the Standardised Approach (SA) as per the European Union's regulatory framework. The mapping aligns KBRA's credit ratings with a regulatory credit quality scale (CQS) for prudential purposes, ensuring consistency with the European Securities and Markets Authority (ESMA) guidelines and the Joint Committee's (JC) methodology.

The mapping is based on the Commission's Implementing Regulation (EU) 2016/1799, which defines the methodology for translating external credit assessments into prudential risk weights. The JC has determined that the mapping should not be interpreted as a comparison of rating methodologies or as a report under the Credit Rating Agencies Regulation (CRA), but rather as a regulatory alignment for credit risk assessment.

Main Rating Scales

KBRA provides two types of credit ratings:

• Long-term credit rating scale: Includes ratings from AAA to D.
• Short-term credit rating scale: Includes ratings from K1+ to D.

Each rating category is mapped to a corresponding credit quality step (CQS) based on quantitative and qualitative analysis, as well as the internal relationship between long-term and short-term ratings.

Key Points of the Mapping Process

1. Methodology

• The mapping methodology is defined in the Commission's Implementing Regulation (EU) 2016/1799.
• It combines quantitative factors (long-run default rates) and qualitative factors (benchmark definitions and rating meanings).
• The mapping is based on the equivalent categories in the international rating scale and the risk weights assigned by the CRR.

2. Quantitative Factors

• The long-run default rates for each rating category were calculated based on the available data.
• For ratings with insufficient data, the long run default rate benchmark from the equivalent international rating scale was used.
• For the D rating category, no default rate calculation was made as it already indicates a default situation.

3. Qualitative Factors

• Qualitative factors are considered when quantitative data is insufficient to assess default behavior.
• The meaning and relative position of each rating category are aligned with the CQS.
• The definition of default by KBRA is consistent with the benchmark definition in the ITS, covering missed payments, legal protection from creditors, and distressed exchanges.

4. Risk Weights

• According to Article 131 of the CRR, all CQS from 4 to 6 are assigned a risk weight of 150%.
• This uniformity influences the mapping of short-term ratings to CQS 4 or 5, as they are associated with long-term ratings that fall into these steps.

Mapping Tables

KBRA Long-term Credit Rating Scale

KBRA Short-term Credit Rating Scale

Main Viewpoints

• The mapping is intended to align KBRA's credit assessments with a regulatory scale for prudential purposes.
• It does not compare methodologies with other ECAIs or serve as a report under the CRA.
• The process considers both quantitative and qualitative factors, with the latter being more prominent where data is limited.
• The use of long-run default rate benchmarks ensures consistency and comparability with international standards.
• Short-term ratings are derived based on the internal relationship with long-term ratings, with a preference for the most conservative CQS in case of a tie.

Key Information

• KBRA is certified as an ECAI, meeting the criteria for both long-term and short-term credit assessments.
• The mapping is essential for calculating risk weights under the SA, ensuring that credit risk is appropriately assessed for regulatory compliance.
• The lack of historical default data for KBRA ratings necessitates the use of benchmark default rates for mapping.
• All CQS from 4 to 6 have the same risk weight of 150%, which simplifies the mapping process for short-term ratings.
• The final mapping for all rating categories is based on a combination of quantitative analysis and qualitative judgment.