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Financial Institutions

The London-based bank rating team offers investors, issuers and other market participants comprehensive and forward-looking analyses and ratings on banks and other financial institutions in Europe and beyond. The team comprises experienced professionals with a solid background in fundamental and market-related analysis on banks as well as on regulatory developments.

A forward-looking bank rating methodology

Scope's bank ratings are based on a highly intuitive, transparent and forward-looking methodology, shaped to the post-crisis world of banking and thus free of the legacies of the past. The methodology takes into account the latest structural developments in the banking industry and its regulatory environment. The latest bank rating methodology update was published in May 2016.

Based on fundamentals and resolution regimes

The bank rating methodology is an integrated mix of both qualitative and quantitative elements with the Issuer Credit-Strength Rating ("ICSR") as the linchpin rating. Debt securities are rated based on the issuer's credit strength (reflected by the ICSR) and the specificities of the debt security itself (e.g. MREL/TLAC-eligible senior unsecured debt for resolvable banks is rated below the ICSR). Encapsulated in Scope's methodology is the relevance of resolution and recovery regimes, which, if properly and constantly implemented, should provide more stability and predictability to bank ratings over time.

State support more unlikely

Scope's view is also that external state support for banks in distress is becoming more unlikely in developed markets, and thus would not be an automatic rating booster. Nor does Scope see an automatic link between the credit strength of banks and that of their home sovereigns, especially in the case of larger, geographically diversified banking groups.

Scope considers that a bank's credit dynamics can only be properly assessed through a "compare and contrast" analysis, so conducting peer-group assessments is of key importance, with the business model at the core of the methodology. The qualitative forward-looking analysis and ratings are supported by financial forecasts.

In addition to the bank rating methodology, Scope has published a methodology for rating and analysing bank capital securities (Additional Tier 1 and Tier 2). The latest update of this methodology was published in May 2016.

Scope has also published a methodology for rating covered bonds issued by bank (July 2016).

Latest research

Scope offers institutional investors forward-looking, opinionated research on banks across Europe. This includes regularly updated and monitored names-specific issuer reports, sector outlooks, comparative analyses, theme-specific think pieces, updates on regulatory developments, etc. Our research output is supported by conferences and symposia, investor roundtables, face-to-face meetings with clients and theme-specific events.

We welcome any feedback from investors, issuers and other market participants about topics and themes Scope should cover more prominently in its research & analysis in the future.

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