DBRS Releases Updated Global Methodology for Rating Banks & Banking Organisations; No Rating Changes

DBRS has today published an updated version of the Global Methodology for Rating Banks and Banking Organisations that is effective as of today. The changes are largely for clarification and to update the language to reflect the evolving regulatory environment. There are no material changes from the last published version in terms of the core approach used by DBRS to assess banks. Accordingly, this update has not resulted in any rating changes or other rating actions. Given the limited changes, this update was not published with a request for comment.

Notwithstanding today’s release, DBRS continues to work on enhancing the effectiveness of our banking methodology and related criteria. To ensure greater consistency in our bank ratings, DBRS is working on introducing specific metrics that can be linked to our building blocks and tracked over time. Part of this effort also involves revising the application of the building blocks through modification of the grids. Another change that is planned is to integrate the three separate criteria that address the analysis of support and bank obligations: DBRS Criteria – Support Assessments for Banks and Banking Organisations (March 2016), and DBRS Criteria - Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2016), and Critical Obligations Rating Criteria (February 2016). DBRS anticipates putting out a request for comment on the enhanced methodology later in 2016.

With the bail-in of senior obligations being introduced in many countries, the treatment of bank obligations needs to be more closely integrated into the fundamental bank methodology. Notching of bank obligations is no longer just an issue for bank capital securities, but now also potentially involves senior obligations that may be treated differently in resolution. For more discussion on this evolving picture, see DBRS Commentary: Developments in European Bank Resolution Frameworks and their Impact on Bank Creditors, 29 July 2016. Accordingly, the next version of the global methodology will incorporate DBRS’s approach to rating all bank obligations from critical obligations to contingent capital instruments and preferred shares. The next update of the banking methodology will also integrate our approach to support, both internally within banking groups, and externally in the form of systemic support.

DBRS criteria and methodologies are publicly available on its website at: http://www.dbrs.com/about/methodologies

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.

This methodology is intended for use in ratings assigned by DBRS Limited, DBRS, Inc. and DBRS Ratings Limited.