Bank Survivability Assessment
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| Publication Date: Sep 12, 2002 00:00 EST |
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BANK
SURVIVABILITY ASSESSMENT DEFINITIONS
A
Standard & Poor's bank survivability assessment is a current opinion on
the likelihood that over the medium-term, a bank will either directly or
through a successor organization, remain in operation, regardless of whether
it is solvent or insolvent, paying all of its obligations on a timely basis
or not. The survivability assessment, however, does not itself comment on
which particular functions the bank might continue to perform and which
may cease in a stress situation. The bank survivability evaluation is linked
to the issuer credit rating, and generally would be the same or higher than
the issuer credit rating. A relatively low survivability assessment does
not constitute an opinion by Standard & Poor's that a particular bank is
likely to fail; rather it indicates a vulnerability to adverse circumstances
which could affect the bank's ability to meet its financial obligations
on a timely basis, without special circumstances which would clearly enhance
the likelihood that it would continue to operate in such an event.
Compared to the issuer credit rating, the survivability assessment places
greater emphasis on factors such as a bank's relative position in the banking
system of its country, in terms of market share and financial strength,
special roles, and ownership by the government or a strong parent. The survivability
assessment thus takes into account that certain banks, even though they
may exhibit certain weaknesses that might impair the likelihood that they
will be able to be repay all of their financial obligations on a timely
basis, could be either among the strongest within their own country or considered
"too big to fail," and thus are more likely, if necessary, to be kept open
through direct government support or regulatory forebearance. The survivability
assessment also takes into account that in the event of systemic crises,
governments sometimes temporarily freeze deposits or otherwise cause them
to default on certain financial obligations, but typically allow certain
banks to remain in operation.
The existence of a survivability assessment at a given level does not imply
that any particular unrated financial obligation of the bank will be repaid
or otherwise honored with that level of likelihood. The survivability assessment
is in effect the ceiling at which certain obligations of, or supported by
the bank might be rated absent external support such as a guarantee. Standard
& Poor's will evaluate the likelihood that a particular type of obligation
would still be honored over the expected lifetime of a particular transaction,
in rating a particular issue of, or supported by the bank. Therefore, users
of ratings should consult the ratings on the specific issues.
Survivability assessments are based on current information furnished by
the bank or obtained by Standard &Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with
the survivability assessment, and may, on occasion, rely on unaudited financial
information. Survivability assessments may be changed, suspended or withdrawn,
as the result of changes in the bank's credit ratings, as well as to changes
in, or unavailability of information, or based on other circumstances.
AAA
A bank with a 'AAA' survivability assessment has EXTREMELY STRONG likelihood
of remaining in operation either directly or through successors,, and the
assessment typically would only be given to banks that also maintain that
level of capacity to meet their financial commitments on a timely basis.
'AAA' is the highest survivability evaluation assigned by Standard &
Poor's.
AA
A bank with a 'AA' survivability assessment has VERY STRONG likelihood of
continuing operations, and the assessment also typically would only be given
to banks that also maintain that level of capacity to meet their financial
commitments on a timely basis. The likelihood differs from that of the highest
assessed banks only in small degree.
A
A bank with a survivability assessment of 'A' has STRONG likelihood of continuing
operations, but is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than banks assessed in higher categories.
BBB
A bank with a survivability assessment of 'BBB' has ADEQUATE likelihood
of continuing operations. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened likelihood of so doing,
than in the higher categories.
BB
A bank with a survivability assessment of 'BB' faces significant ongoing
UNCERTAINTIES and exposure to adverse business, financial, or economic conditions.
These could lead to uncertainties in the bank's ability to maintain operations
in which case the bank may become subject to regulatory intervention.
B
A bank with a survivability assessment of 'B' is VULNERABLE. Adverse business,
financial or economic conditions will likely impair the bank's ability to
maintain operations in which case the bank may become subject to regulatory
intervention.
CCC
A bank with a survivability assessment of 'CCC' is CURRENTLY VULNERABLE,
and is dependent upon favorable business, financial, economic or regulatory
actions to remain in business.
CC
A bank evaluated at 'CC' is CURRENTLY HIGHLY VULNERABLE. Plus (+) or minus
(-): Evaluations from 'AA' to 'CCC' may be modified by the addition of a
plus or minus sign to show relative standing within the major categories.
R
A bank evaluated at 'R' is currently under regulatory supervision owing
to its financial condition. Its ability to remain in business will be determined
by future regulatory action.
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