Jan 25 2011
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S&P Requests Comments From Constituents Of The Islamic Financial Sector On Proposed Changes To Criteria For Rating Banks
On Jan. 6, 2011, we published a request for comment on proposed changes to our criteria for rating banks and institutional brokers. The proposed criteria aims to provide additional insight into the way we rate banks, including Islamic banks, as well as enhance ratings comparability across sectors and geography. Our objective is to create an integrated, globally consistent framework that builds on what we know and have learned about the industry since the credit crunch began in 2007.
With the proposed criteria, we intend to provide the market with an intuitive framework that guides the fundamental assessment of credit risks. We believe that consistent application of this framework should result in ratings that are forward looking and comparable across geography and industry sectors.
Standard & Poor's considers that Islamic banks differ from conventional banks in several important ways (see "The Meaning Of Ratings For Islamic Financial Institutions," published Oct. 25, 2006). Yet we assign ratings to banks globally, regardless of their economic nature, legal form, or specific features. We assess Islamic banks within the context of our criteria framework for banks, taking account of the specificities of individual entities. Our goal is to provide market participants with independent credit opinions, and we do not, for instance, assess or comment on Sharia compliance.
We have tested the proposed criteria on a general sample of banks we rate. The results indicate that the potential impact on ratings would likely be modest. The key factors driving potential rating changes include: greater importance of economic and industry risk factors; increased focus on credit stability; and greater emphasis on capital.
The proposed changes will not affect our existing criteria for rating sukuk (see "Standard & Poor's Approach To Rating Sukuk," Sept. 17, 2007).
We welcome constructive feedback from all constituents of the Islamic Finance sector on any component of the proposed criteria/methodology. Please submit your written comments by March 7, 2011, to CriteriaComments@standardandpoors.com. Once the comment period is over, we will review the comments and publish the updated criteria/methodology.
The request for comment and other related articles listed below are available on www.standardandpoors.com/AI4FI :
- Request For Comment: Banks: Rating Methodology, Jan. 6, 2011
- Industry Risk For Investment Banking Is Generally Higher Than For Other Financial Institutions, Jan. 6, 2011
- Request For Comment: Methodology For Determining Banking Industry Country Risk Assessments, May 13, 2010
- Preliminary Banking Industry Country Risk Assessments In 23 Countries, Jan. 6, 2011
- S&P Requests Comments On Bank Hybrid Capital Criteria And Publishes Updated Bank Capital Methodology And Assumptions, Dec. 6, 2010
Criteria Officer, Global Financial Institutions:
Hans Wright, London
Chief Credit Officer, Global Corporates & Governments:
Colleen Woodell, New York
Primary Credit Analysts:
Hans Wright, London
Nicolas Hardy, Paris
Emmanuel Volland, Paris
Criteria Officer, EMEA Financial Institutions:
Michelle Brennan, London
Chief Credit Officer, EMEA:
Blaise Ganguin, Paris
- Ends -
For more information, please contact:
London: +44 20 7176 3605
Paris: +33 1 44 20 6740
Frankfurt: +49 69 33999 225
Milan: +39 02 72 111 245
Madrid: +34 91 389 6944
Moscow: +7 495 783 4009
Stockholm: +46 8 440 5914
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