Launching Our European Bank Credit Ratings

Over 20 European banks have been added to Morningstar's Corporate Credit Rating Service, plus several from Latin America

Jim Leonard, CFA 7 October, 2011 | 3:28PM

In late 2009, Morningstar announced the launch of corporate credit ratings, initiating coverage on 100 firms. Since then, we've published ratings on nearly 700 firms across a variety of industries, including the July 2010 launch of our U.S. bank credit ratings. We are now pleased to announce that we are adding global banks to this roster of companies, albeit with a few modifications to our U.S. bank rating methodology.

While our system for rating global banks is similar to the methodology used for U.S. banks--emphasising economic moats and competitive analysis, a bank's ability to handle stress-case scenarios, and its overall solvency--there are a few important differences. For example, we have incorporated country risk into the Business Risk Score, and we have changed our Distance to Default methodology to a market-based approach utilising credit spreads. Like U.S. banks, however, the global bank rating methodology is based upon four key pillars:

-- We evaluate a firm's moat and other core business characteristics in a Bank Business Risk Score

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About Author

Jim Leonard, CFA  James Leonard, CFA is a securities analyst for Morningstar, covering financial institutions.

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