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    ARCHIVE | General Criteria | Request for Comment: Request For Comment: Methodology For Determining Ratings-Based Inputs
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    ARCHIVE | General Criteria | Request for Comment: Request For Comment: Methodology For Determining Ratings-Based Inputs

    (Editor's Note: This article is no longer current. The final criteria article was published on July 26, 2024.)

    This article presents the principles S&P Global Ratings applies when assessing the creditworthiness of assets or entities it doesn't rate, where this information is required to inform its rating analysis. These principles, which are materiality-based, are reflected in our sector-specific criteria. This proposal also includes updates to the way we incorporate ratings from other credit rating agencies (CRAs). If they are adopted as proposed, these updates would result in changes to other sector-specific criteria (see the appendix for a list of affected criteria and a summary of the changes proposed for each).

    The methodologies that we use to generate our credit ratings may require us to assess the creditworthiness of assets or entities that an issuer (or issue) has exposure to. In cases where we don't have an S&P rating on an asset or entity to use as an input to our analysis, we may determine a rating input reflective of its credit risk using alternative means that will depend on the materiality of the input to our analysis and the information available to us.

    In some of these cases, it may be appropriate for us to consider using a rating from another CRA as an input for the creditworthiness assessment. At the same time, in our credit ratings process, we seek to assign ratings, through the application of our own methodologies, that are consistent with our ratings definitions and that reflect our credit opinions. We are proposing these updates to enhance the transparency of our approach.

    This article lays out our proposed generic, materiality-based, cross-practice framework for determining rating inputs, and specific applications are addressed in separate general or sector-specific criteria.

    KEY CHANGES

    This is a new article that formalizes and restates the key guiding materiality-based principles we currently consider when using rating inputs in our rating analyses. Those are used to perform our rating analysis in accordance with the application of many of our sector-specific criteria.

    In addition, as part of this proposal, we are updating our approach to incorporating other CRA ratings into our analysis. Under this updated approach, when we use other CRA ratings, we would do so without adjusting (notching) them, by considering the materiality of those inputs to our overall credit rating analysis. This is to ensure that the ultimate ratings we assign reflect our credit opinions and are consistent with our ratings definitions. In contrast, the current approach generally involves adjusting other CRAs' ratings, based in part on a statistical analysis, to account for differences with our own ratings.

    We are not proposing any other changes to the way we currently determine rating inputs for assets or entities that do not carry an S&P rating.

    IMPACT ON OUTSTANDING RATINGS

    If implemented as proposed, these criteria will lead to changes to 23 criteria articles and/or their related guidance (see the "Related Changes To Affected Criteria" section). We expect no ratings impact resulting from the application of such changes, except for:

    • Fixed-income funds with fund credit quality ratings: We expect we could raise up to 15% of ratings by one notch.
    • Leveraged funds rated under our market value securities criteria: We anticipate raising 6% of ratings by up to two notches.
    • Structured settlement securitizations: We could raise up to 7% of ratings by up to two notches.

    WHEN AND HOW TO COMMENT

    We are seeking feedback on the proposed criteria by Feb. 29, 2024. We encourage interested market participants to submit their written comments to https://disclosure.spglobal.com/ratings/en/regulatory/ratings-criteria. Comments may also be sent to CriteriaComments@spglobal.com should participants encounter technical difficulties.

    PROPOSED METHODOLOGY

    Overview

    We determine rating inputs in our analysis based on their materiality to our final rating outcome. Exposures for which we use rating inputs generally fit into one of these three broad categories:

    • Substantial rating drivers: Undiversified or concentrated exposures, the credit quality of which is a substantial or sole driver of our rating outcome;
    • Primary rating drivers: In a diversified pool of exposures that can have a material impact on our rating, rating inputs that are primary, but not substantial, drivers of our rating analysis; and
    • Secondary rating drivers: In a diversified pool of exposures where the analysis of those exposures is only one of several building blocks of the final rating, rating inputs that have limited materiality to the final rating outcome.

    In addition, further considerations may apply when inputs are used to determine our assumptions for potential asset price movements, or otherwise, as part of our analysis of liquidity risks in a diversified pool. These further considerations can apply for both primary and secondary rating drivers.

    The characteristics of each category inform the type of analysis we may conduct for the purpose of determining rating inputs and/or the sources of information we may use in our analysis under applicable criteria. Typically, the more material the rating input is to our rating analysis, the more specific the information we consider in determining our rating input.

    In certain cases, which we describe further in this article, we may incorporate the rating from other CRAs as a rating input to our analyses (see chart 1). To do so, the following general principles apply, regardless of materiality:

    • We consider CRA ratings that issuers or transaction parties make available to us as part of the rating process.
    • We may incorporate ratings issued by CRAs that are 1) registered or certified in accordance with relevant CRA regulations, and 2) included in a publicly available mapping table that one or more regulators use in establishing capital requirements for credit assets and that relates the CRA's rating scale to S&P Global Ratings' global rating scale (regulatory mapping).
    • Whenever CRA ratings are incorporated into our analysis, we use their S&P Global Ratings equivalent rating input without adjustment, as informed by relevant regulatory mappings. Examples of such regulatory mappings include, but aren't limited to, those produced by the National Association of Insurance Commissioners (NAIC) and used by state insurance regulators in the U.S. and those determined by the European Supervisory Authorities for use in applying prudential regulation in the European Union.
    • When more than one CRA rating is made available to us to be used as a rating input, we typically use the lowest equivalent rating input.
    • In some sector-specific criteria, when S&P Global ratings are on CreditWatch, we use the rating level immediately above or below, as appropriate. This is to reflect the likelihood of such a rating action. Under those same sector-specific criteria, we treat similarly another CRA's rating that's on the CRA's equivalent of our CreditWatch.

    Chart 1

    image

    Substantial Rating Drivers

    Chart 2

    image

    For exposures that are substantial or sole drivers of our rating, we solely use our own credit views. Our sector-specific criteria describe which type of rating input is used in each case, for example S&P ratings or credit estimates. We would not consider incorporating a third party's credit opinions, including those produced by another agency, for one of these sole or substantial drivers of our analysis because this would result in our rating effectively reflecting that other opinion instead of our own. This includes situations where:

    • The issued security's creditworthiness is aligned with that of an underlying source of risk, such as with repackaged securities, credit-linked notes, tender option bonds, loan participation notes, funding agreement-backed notes, and insurance-linked securitizations.
    • Creditworthiness is substantially driven by an underlying source of risk (corporate securitizations, future flows, and covered bonds, for example) or generally depends on it (such as with certain counterparty and operational risks).
    • The credit quality of low-diversity exposures influences the assessment of credit enhancement levels in structured finance--for example, the originator's creditworthiness in the assessment of purchase and payment rate in credit card ABS; and
    • A limited number of exposures substantially drive our rating analysis--for example, this would generally be the case when largest obligor tests or similar concentration floors drive the rating outcome.

    Primary Rating Drivers

    Chart 3

    image

    Diversified pools that are typically found in structured finance transactions and fund credit quality structures as well as those insured by bond insurance entities are examples of primary rating drivers.

    For exposures that we view as primary rating drivers, we may consider a broader range of rating inputs than we would for substantial rating drivers, depending on sector-specific criteria. For example, in addition to S&P ratings and credit estimates, we may consider rating inputs mapped from an originator's internal score (see our mapping criteria in the Related Criteria section) or that reflect our sector views. For these exposures, we may also consider the use of other CRA ratings in our analysis.

    In these instances, because the rating inputs are material to our credit analysis, we may incorporate CRA ratings to inform our work if, in addition to the conditions laid out in the Overview section:

    • They are public, unqualified, global-scale ratings; and
    • They have been issued by CRAs with ratings that we periodically assess as being sufficiently comparable to our own ratings, using quantitative data, qualitative data, or both, as appropriate (see the "CRA Rating Comparability Review" section).

    In addition, we limit those inputs in our credit analysis to a level such that our rating outcome reflects our credit opinion (see the "Bucket limits" section).

    For primary rating driver exposures rated by CRAs that may be outside of this framework, we determine the inputs, based on information available to us and considering their impact on the ratings analysis. For example, we could use credit estimates or sector analysis or consider other data sources, including ratings-related information from other CRAs pertaining to the exposure.

    CRA Rating Comparability Review

    For primary drivers of our rating analysis, to incorporate another CRA's ratings as inputs, we first assess whether they are sufficiently comparable to our own given the materiality of primary drivers in the generation of our credit ratings. As noted, the ratings we assign constitute our opinion of creditworthiness, in line with our ratings definitions, which are benchmarked to specific degrees of rating stress.

    If we were to incorporate other CRA ratings that are calibrated to materially different assumptions, the ultimate rating we assign could materially deviate from our own ratings definitions and stress benchmarks. As a result, our approach enables us to incorporate other CRA ratings into our analysis if the ultimate ratings we assign remain consistent with our ratings definitions.

    When we review the comparability between our credit ratings and another CRA's ratings, we conduct an analysis of the ratings the CRA assigns, generally on a broad sector level (see chart 4). We consider both historical ratings performance (historical default and transition analysis) and a review of issuers or issues that carry ratings from us and the other CRA (overlapping ratings analysis), based on information made available to us:

    • The historical default and transition analysis generally allows us to understand variations among ratings behavior, methodologies, ratings definitions, and overall ratings comparability.
    • The overlapping ratings analysis enables us to assess the percentage of overlapping ratings being lower, the same, or up to three notches higher than our ratings.

    Chart 4

    image

    Nonetheless, we may choose to conduct our own creditworthiness assessments when we believe that the nature of the exposure risk requires more extensive analysis. For example, this could be the case if an issuer includes significant exposure concentrated in a subsector that we believe could feature specific risk factors or that might not have been extensively represented in the sector data we reviewed as part of our comparability review.

    Bucket limits

    For primary rating drivers, we also limit the use of other CRA ratings to a certain proportion of the pool of exposures--typically no higher than 50% (see the appendix for further details on bucket sizes in sector-specific criteria). These limitations ensure that the rating we assign remains the reflection of our own credit opinion, in line with our ratings definitions. The size of these buckets may vary by sector-specific criteria, asset types, and issuers and depends on the way the inputs are used. The bucket limitations reflect the sensitivity of our rating outcomes to potential movements in the other CRA ratings used as rating inputs. As a result, they generally depend on factors such as the weight in our rating of the analysis using CRA inputs, the other factors we consider in our analysis, the credit quality of the exposures, and the degree of asset granularity.

    Secondary Rating Drivers

    Chart 5

    image

    Secondary rating drivers are typically exposures that are part of a diversified pool, and their analysis is one of several building blocks of the final rating, or they're exposures that have an indirect and limited impact on the final rating. Accordingly, for exposures we view as secondary rating drivers, we may incorporate a broader range of information for determining rating inputs than we may typically consider for primary drivers because their materiality to our rating outcome is lower.

    For example, under our criteria for assessing insurer risk-based capital adequacy and determining the rating input for credit risk, we may determine rating inputs based on credit measures approved by the insurer's domestic regulator--such as the NAIC's designations assigned by Securities Valuation Office in the U.S.--as well as insurers' internal credit scores that are mapped to credit quality steps under Solvency II and accepted for the determination of capital requirements by the insurer's regulator. This is because insurance portfolios are made of many assets, and the credit risk of the portfolio is one of several risks incorporated into our assessment of insurer risk-based capital adequacy (see "Insurer Risk-Based Capital Adequacy--Methodology And Assumptions, Nov. 15, 2023"). Risk-based capital adequacy is one input in our methodology for rating insurance companies (see "Insurers Rating Methodology," July 1, 2019).

    We may also be able to incorporate a larger universe of CRA ratings than we would for primary rating drivers, provided they meet the conditions laid out in the Overview section of these criteria because of these exposures' more limited impact on our rating. For assets rated by CRAs that may be outside this framework, we would determine the inputs, based on information available to us and considering their impact on the ratings analysis.

    For example, in commercial mortgage-backed securities, the weight of property insurer inputs to the final rating is generally limited, as insurance coverage payments are relied upon for payments to the rated notes only as second or third source of funds after a casualty. In this case, for property insurers that we do not have a credit opinion on, we may look more broadly to other CRA ratings.

    In our analysis of issuers subject to prudential regulatory oversight, such as insurers, we typically use CRA ratings that are approved for use in determining capital requirements under that issuer's applicable regulation.

    In addition, we generally limit CRA-derived rating inputs in any given jurisdiction to a level no higher than what we usually assign in applying our ratings above the sovereign criteria in that country and sector to our ratings.

    Additional Considerations For Liquidity Assessments

    Chart 6

    image

    In certain criteria, we may use rating inputs for assets in diversified pools to determine asset price haircuts or otherwise as part of our liquidity analysis. This is sometimes a primary driver in the analysis (principal stability fund ratings and market-value CDOs, for example) and sometimes a secondary driver (insurance, multilateral lenders, and public-sector funding agencies, for example).

    In each case, we apply the general principles described in the sections for primary and secondary rating drivers (depending on whether we regard the asset or entity exposures as primary or secondary drivers) to determine rating inputs, consistent with the sector-specific criteria.

    The principles described in each of these sections also apply to determine the CRA ratings that we may incorporate as rating inputs into our rating analysis, if applicable. In addition, regardless of whether they are primary or secondary rating drivers, we would only use public, unqualified, global-scale ratings from CRAs for which data indicates sufficient market depth for assets rated by these agencies. This is because, here, the rating inputs are used not only to assess creditworthiness but also as a basis for assessing the liquidity of assets. To assess this, we consider:

    • The existence of an actively traded index that includes assets rated by the other agency in the sectors in which the issuer will invest. This demonstrates the liquidity of assets carrying such ratings.
    • Alternatively, the presence of information from broadly recognized data providers that demonstrate the existence of active trading markets for assets in the chosen sectors with ratings from that other agency (for example, based on trading volumes or bid/ask spreads).

    Where liquidity assessment is a primary rating driver, we may also consider the lower rating from at least two CRAs on asset types that we view as less widely followed or transparent to trading markets, including for assets that carry a rating from S&P Global Ratings. An example is structured finance, where the investor base for any individual tranche is limited, the rating assumptions generally differ by agency, and market participants' access to information is more limited than for large, publicly listed companies.

    Finally, we might apply an adjusted framework for the analysis of liquidity risk compared to the one proposed above for some sectors that are subject to prudential regulatory oversight. In such cases, we rely on the methodology described in the sector-specific criteria. An example is insurers, for which a potentially broader universe of CRA ratings may be used as rating inputs in our liquidity analysis, consistent with those used in our assessment of capital adequacy (see "Insurers Rating Methodology," July 1, 2019).

    APPENDIX: RELATED CHANGES TO AFFECTED CRITERIA

    If we apply these principles as proposed, they would result in changes to the following criteria articles and/or, in some cases, the related guidance:

    A summary of the changes proposed for each--as well as their expected rating impact, if any--is provided in the table below. It should be read in conjunction with the relevant criteria articles. When this proposal is finalized, we will update each article accordingly. Criteria not listed in this Appendix are not expected to be affected because they are out of scope of this request for comment or because they already allow for the application of its principles.

    1. Primary rating drivers: For the following articles, we will update our approach to use of CRA rating inputs to reflect our proposed approach for primary rating drivers.
    Affected criteria or guidance article Expected ratings impact Key relevant updated sections Proposed changes
    Guidance: Global Methodology And Assumptions For CLOs And Corporate CDOs None "Determining inputs for use in the CDO Evaluator" --Rating inputs may be determined using available CRA ratings. This would replace current guidance for determining rating inputs based on NRSRO ratings. But, the overall order of priority in which we use sources of information to determine rating inputs remains unchanged.

    --For CRA ratings that fall outside of this framework, we may rely on information provided by the collateral manager to conduct our own credit estimates. Pending completion of this, the rating input will be determined by the collateral manager in its reasonable credit judgment.

    Global CDOs Of Pooled Structured Finance Assets: Methodology And Assumptions None "Appendix B: How We Determine A Rating Input For A Security For The Purpose Of Inclusion In CDO Evaluator" Rating inputs for assets that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings--to a limited extent. This would replace our current approach for incorporating ratings from other agencies in these criteria.
    CDOs Of Project Finance Debt: Global Methodology And Assumptions None "Default Parameters" Rating inputs for assets that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings up to 15% of the portfolio amount. This would supplement our current approach for determining rating inputs.
    CDOs And Pooled TOBs Backed By U.S. Municipal Debt: Methodology And Assumptions None "Estimating Default In Municipal Asset Pools" --Rating inputs for assets that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings up to 15% of the portfolio amount. This would supplement our current approach for determining rating inputs.

    --For obligors with available CRA ratings outside of this framework, our rating input would continue to reflect our estimates as per table 7 in the U.S. long-term municipal pool criteria, except for exposures to non-municipal debt. For exposures to non-municipal debt, we would determine a case-by-case input. Table 7 in its entirety would remain applicable for borrowers that carry no CRA ratings.

    U.S. Public Finance Long-Term Municipal Pools: Methodology And Assumptions None "Credit estimates for the CDO evaluator test" --Rating inputs for borrowers that do not carry an issuer credit rating, issue rating secured by the same pledge, or credit estimate from S&P Global Ratings may be determined using an available CRA issuer rating or an issue rating secured by the same pledge of the borrower up to 25% of the portfolio amount. This would supplement our current approach for determining rating inputs.

    --For obligors with available CRA ratings outside of this framework, our rating input would continue to reflect our estimates as informed by table 7, except for exposures to non-municipal debt. For exposures to non-municipal debt, we would determine a case-by-case input. Table 7 in its entirety would remain applicable for borrowers that carry no CRA ratings.

    Global Methodology For Solar ABS Transactions None "C&I PPAs, Leases, And Loans" Rating inputs for C&I obligors that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings up to 15% of the portfolio amount. This would supplement our current approach for determining rating inputs.
    U.S. Structured Settlement Securitizations: Methodology And Assumptions Up to 7% of ratings may be raised by up to two notches "Insurance company default assumption" Rating inputs for assets that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings, up to 15% of the portfolio amount. For obligors with available CRA ratings outside of this framework, we would determine rating inputs in accordance with this RFC. This would supplement and amend our current approach for determining rating inputs.
    Global Auto ABS Methodology And Assumptions None "Step 4: Determine a speculative-grade manufacturer additional haircut" As part of our analysis of auto residual value risk, we may, to a limited extent, consider CRA ratings for small individual exposures to manufacturers that do not carry a rating or credit estimate from S&P Global Ratings. For other exposures to manufacturers with CRA ratings, our rating assumption for manufacturers would reflect our own review.
    Methodology And Assumptions For Analyzing Bond Insurance Capital Adequacy None "Appendix I: Rating Inputs" and "Appendix III: CRA Mapping—Corporate And Government Ratings" Where we use other CRA ratings to inform our rating input for the purposes of assessing exposures to insured transactions, we would do so in applying the proposal for primary rating drivers described in this request for comment with no change to current buckets or per-issuer limit. For assets with available CRA ratings outside of this framework, if we have assessed the economic risk for the country of exposure under our Banking Industry Country Risk Assessment criteria, we would determine the capital charges for the exposures according to tables 4-5 of the bond insurance capital adequacy criteria. This would replace our current approach for incorporating ratings from other agencies.
    Fund Credit Quality Ratings Methodology Up to 15% of ratings may be raised by one notch "1) Corporate and government ratings" and "3) NRSRO mapping" in "Appendix B: Rating Inputs" Rating inputs may be determined using available CRA ratings up to a maximum of 40% of the portfolio amount, with no per-issuer limit specific to CRA-rated assets (our assessment of issuer concentration risk under the Portfolio Risk Assessment would remain unchanged, however). This would replace our current approach for determining rating inputs based on NRSRO ratings for corporate and government and for structured finance exposures. For excess exposure, we would determine appropriate rating inputs in accordance with this request for comment. But the overall order of priority in which we use sources of information to determine rating inputs remains unchanged. For fund investments, our approach remains unchanged.
    Global Rating Methodology For Credit-Tenant Lease Transactions None "Pool default risk" For pooled credit-tenant lease transactions, consistent with our CLO and corporate CDO criteria, we may consider CRA ratings up to 15% of the portfolio.
    European CMBS Methodology And Assumptions None "Hedge break costs" and "Appendix 4: Income Strength Assessment" Rating inputs for tenants that are part of a diversified pool and do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings to a limited extent.
    U.S. Insurance Premium Loan Securitizations: Methodology And Assumptions None "Credit analysis" --Rating inputs for assets that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings up to 35% of the portfolio amount. This would supplement our current approach for determining rating inputs.

    -- For exposures with available CRA ratings outside of this framework, we would determine rating inputs in accordance with this RFC.

    --With the potential use of more rating inputs derived from new CRA ratings where we currently use stressed input assumptions, it is possible that credit enhancement levels resulting from our statistical analysis alone may drop to levels we consider inconsistent with the ratings we assign. As a result, we also propose to introduce new minimum credit enhancement levels that reflect the limits to the predictability of consumer loan performance and insurer repayments.

    The minimum credit enhancement levels, expressed as a percentage of the current pool balance, would be:

    'AAA': 6%

    'AA': 4.5%

    'A': 3.5%

    'BBB': 2.5%

    'BB': 1.75%

    'B': 1%

    These levels would be interpolated to determine the rating-level (i.e., +/- modifiers) minimum credit enhancement.

    We believe that a credit enhancement level below 6% of the current pool balance creates vulnerabilities that are inconsistent with the degree of creditworthiness associated with a 'AAA' rating for this sector.

    2. Primary and secondary rating drivers: For the following articles, we will update our approach to use of CRA rating inputs to reflect our proposed approach for primary rating drivers for certain exposures and secondary rating drivers for other exposures.
    Affected criteria or guidance article Expected ratings impact Key relevant updated sections Proposed changes
    CMBS Global Property Evaluation Methodology (and related guidance) None --"Revenues,"

    "Capitalization Rates," and

    "Analytical Metrics And Supplemental Adjustments"

    (and related sections in guidance)

    --"Insurance" (and related sections in guidance)

    		--Rating inputs for tenants that are part of a diversified pool and that do not carry a rating or credit estimate from S&P Global Ratings may be determined using available CRA ratings to a limited extent, in applying our proposal for primary rating drivers.

    --We may determine insurers' credit quality using CRA ratings, in applying our proposed approach for secondary rating drivers, for insurers that do not carry a rating or credit estimate from S&P Global Ratings. An exception is concentrated property transactions featuring large or concentrated insurer exposures, for which we would generally rely on our own assessment of credit quality.

    North America Railcar Lease-Backed ABS Methodology And Assumption None --Supplemental test, described in paragraphs 37-39

    --"Insurance"

    		--Rating inputs for lessees that do not carry a rating or credit estimate from S&P Global Ratings may be determined used CRA Ratings to a limited extent in the supplemental test, unless these exposures are substantial rating drivers.

    --We also propose to consider CRA ratings on rail insurers that do not carry a rating or estimate from S&P Global Ratings, in applying our proposal for secondary rating drivers.

    3. Secondary rating drivers: For the following articles, we will update our approach to use of CRA rating inputs to reflect our proposed approach for secondary rating drivers.
    Affected criteria or guidance article Expected ratings impact Key relevant updated sections Proposed changes
    Rating Methodology And Assumptions For Global CMBS None "Additional adjustments" and "Appendix 4: Insurance" We may determine insurers' credit quality using CRA ratings for insurers that do not carry a rating or credit estimate from S&P Global Ratings. An exception is concentrated property transactions featuring large or concentrated insurer exposures, for which we would generally rely on our own assessment of credit quality.
    Insurance Criteria For U.S. And Canadian CMBS Transactions None "Minimum Insurer Ratings And General Parameters" Same as above.
    Rating Methodology And Assumptions For Japanese CMBS None "Additional adjustments" and "Appendix 4: Insurance" Same as above.

    4. Liquidity assessment, primary rating drivers: For the following articles, we will update our approach to use of CRA rating inputs to reflect our proposed approach for liquidity as a primary rating driver.
    Affected criteria or guidance article Expected ratings impact Key relevant updated sections Proposed changes
    Principal Stability Fund Rating Methodology None "Credit Quality" and related language in the criteria, including tables 1 and 2 --We propose to extend the use of available CRA ratings to determine rating inputs for all asset classes--not only for municipal debt as we do currently, up to a maximum aggregate exposure unchanged from today (e.g., 15% for a 'AAAm' rated fund, 30% for a 'BBBm' rated fund).

    --We also clarify our approach to determining short-term rating inputs for assets carrying a CRA rating. We would first look to those assets' long-term CRA rating to determine their long-term rating equivalent from S&P Global Ratings, and then the corresponding short-term ratings.

    --As per this request for comment, we would expect structured finance assets to carry at least two ratings, including those that carry a rating from S&P Global Ratings, and use the lower of such ratings when applying these criteria. Absent this, we may consider the asset unrated. Structured finance assets that do not carry a rating from S&P Global Ratings would be counted within the maximum CRA rating exposure limit above.

    --The analysis of high bank concentrations and concentration eligible are unchanged. Also unchanged is the analysis of funds that limit all investments to maturities of 30 calendar days or less with the highest S&P Global Ratings short-term ratings ('A-1+') or that invest exclusively in sovereigns rated 'AA-' or higher as described in paragraph 96. All of the factors in this bullet point relate to exposures substantial to the rating.

    Methodology And Assumptions For Market Value Securities 6% of ratings (one rating) may be raised by up to two notches "Use of ratings in these limit calculations" and "Unrated securities" --Rating inputs for assets that do not carry a rating from S&P Global Ratings may be determined using available CRA ratings up to a maximum of 50%, unchanged from today. This RFC proposal would replace our current approach for incorporating ratings from other agencies.

    --As per this request for comment, we would expect structured finance assets to carry at least two ratings, including those that carry a rating from S&P Global Ratings, and use the lower of such ratings when applying table 12. Absent this, we may consider the asset unrated when applying these criteria. Structured finance assets that do not carry a rating from S&P Global Ratings would be counted within the maximum 50% CRA rating limit above.

    --For obligors with available CRA ratings outside of this framework, our rating input would continue to reflect our estimates as per table 11. An exception is exposures to non-municipal debt, for which we would determine a case-by-case input. Table 11 in its entirety would remain applicable for borrowers that carry no CRA ratings.

    5. Primary and secondary rating drivers: For the following articles, we will update our approach to use of CRA rating inputs to reflect our proposed approach for liquidity as a primary and a secondary rating driver.
    Affected criteria or guidance article Expected ratings impact Key relevant updated sections Proposed changes
    Alternative Investment Funds Methodology None "Funding And Liquidity" and "Risk-Adjusted Leverage" --These criteria reference our market value securities criteria in assessing funds' leverage and their liquidity risk, so the relevant changes proposed there would flow through to our approach here.

    --We would apply our proposal for liquidity as a primary rating driver to our assessment of liquidity in alternative investment funds and as a secondary rating driver to our assessment of stressed leverage.

    6. Liquidity assessment, secondary rating drivers: For the following articles, we will update our approach to use of CRA rating inputs to reflect our proposed approach for liquidity as secondary rating drivers.
    Affected criteria or guidance article Expected ratings impact Key relevant updated sections Proposed changes
    Request For Comment: Methodology For Non-U.S. Public-Sector Funding Agencies None "Liquidity gap analysis" of Appendix B On Nov. 2, 2021, we published a request for comment (RFC), proposing changes to our criteria for analyzing public-sector funding agencies. We propose to supplement this RFC as follows, where rating inputs are used to conduct the liquidity gap analysis:

    --Rating inputs for assessing the liquidity risk haircuts would consider CRA ratings, for assets that do not carry a rating from S&P Global Ratings.

    --Rating inputs for assessing the credit risk haircuts would also consider these CRA ratings, for assets that do not carry a rating from S&P Global Ratings and for which no rating level could be inferred using tables 9 and 10 of the RFC, if applicable.

    Multilateral Lending Institutions And Other Supranational Institutions Ratings Methodology None "Unrated exposures" of the Appendix We propose the following amendments to the determination of rating inputs used to conduct the liquidity gap analysis:

    --Rating inputs for assessing the liquidity risk haircut would consider CRA ratings, for assets that do not carry a rating from S&P Global Ratings.

    --Rating inputs for assessing the credit risk haircuts would also consider these CRA ratings, for assets that do not carry a rating from S&P Global Ratings and for which no rating level could be inferred using tables 18 and 19, if applicable.

    RELATED PUBLICATIONS

    Related Criteria
    Related Research

    This article is proposed Criteria. Criteria are the published analytic framework for determining Credit Ratings. Criteria include fundamental factors, analytical principles, methodologies, and /or key assumptions that we use in the ratings process to produce our Credit Ratings. Criteria, like our Credit Ratings, are forward-looking in nature. Criteria are intended to help users of our Credit Ratings understand how S&P Global Ratings analysts generally approach the analysis of Issuers or Issues in a given sector. Criteria include those material methodological elements identified by S&P Global Ratings as being relevant to credit analysis. However, S&P Global Ratings recognizes that there are many unique factors / facts and circumstances that may potentially apply to the analysis of a given Issuer or Issue. Accordingly, S&P Global Ratings Criteria is not designed to provide an exhaustive list of all factors applied in our rating analyses. Analysts exercise analytic judgement in the application of Criteria through the Rating Committee process to arrive at rating determinations.

    This report does not constitute a rating action.

    Analytical Contacts, Structured Finance:Belinda Ghetti, New York + 1 (212) 438 1595;
    belinda.ghetti@spglobal.com
    Winston W Chang, New York + 1 (212) 438 8123;
    winston.chang@spglobal.com
    Analytical Contact, Bond Insurance:David S Veno, Princeton + 1 (212) 438 2108;
    david.veno@spglobal.com
    Analytical Contact, International Public Finance:Alexander Ekbom, Stockholm + 46 84 40 5911;
    alexander.ekbom@spglobal.com
    Analytical Contact, U.S. Public Finance:Lisa R Schroeer, Charlottesville + (434) 529-2862;
    lisa.schroeer@spglobal.com
    Analytical Contact, Managed Funds:Andrew Paranthoiene, London + 44 20 7176 8416;
    andrew.paranthoiene@spglobal.com
    Methodology Contacts:Claire K Robert, Paris + 33 14 420 6681;
    claire.robert@spglobal.com
    Erkan Erturk, PhD, New York + 1 (212) 438 2450;
    erkan.erturk@spglobal.com
    Nik Khakee, New York + 1 (212) 438 2473;
    nik.khakee@spglobal.com
    Andrew M Bowyer, CFA, London + 44 20 7176 3761;
    andrew.bowyer@spglobal.com
    Lapo Guadagnuolo, London + 44 20 7176 3507;
    lapo.guadagnuolo@spglobal.com

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