Credit assessments under the Standardised Approach in the European Union might use the following rating scale, rating symbols and rating definitions:
AAA rated companies demonstrate an excellent credit quality. Such companies are characterized by an extremely positive future outlook and are viewed as being “first class” business partners. Although the various security elements can certainly change, such changes – to the extent this can be assessed – are highly unlikely to adversely affect the fundamentally strong position of such companies.
AA rated companies demonstrate very high quality with respect to future security. Along with the AAA rated companies, this group forms the so-called “quality class.” Security margins may, however, be comparatively thinner, the solidity of the security elements may fluctuate more or individual assessment components may indicate a greater long-term risk than is the case for AAA rated companies.
A rated companies demonstrate high quality with respect to future security. They show many favourable features which secure their future. Nevertheless, there may be isolated factors which reveal a slightly increased susceptibility to the worsening of circumstances and general economic conditions in the future.
BBB rated companies demonstrate reasonable quality with respect to future security. Compared to A rated companies, however, it is more likely that worsening of general economic conditions could weaken the capability of fulfilling financial obligations.
BB rated companies still have structures adequate to secure their future. Yet they are subject to greater insecurities. Negative business developments or changes in the general financial and economic conditions can make it impossible for them to fulfil their financial obligations in a suitable manner.
B rated companies lack the usual structures to secure their future. Negative business developments or changes in the general financial and economic conditions will most likely make it impossible for them to fulfil their financial obligations in a suitable manner.
CCC rated companies have structures which greatly endanger the security of their future. Capital service is in jeopardy. Such a company is dependent on a favourable development of general economic conditions if it is to be able to meet its financial obligations in the long term.
CC Companies receiving a CC rating have very little security for their future. Capital service is in great jeopardy.
C rated companies have the least future security of all. The basic conditions enabling such debtors to fulfil their financial obligations are extremely poor. Default is imminent.
SD If an issuer defaults with respect to a certain financial liability or class of liabilities but is still able to honour its payment obligations under other financial liabilities or classes of liabilities within the requisite period, it is assigned SD (selective default) status.
D Companies with a D rating are already in default of payment or have filed for bankruptcy. The D rating is irrelevant for the future; it documents solely the bankruptcy of the company.
Why are there no legally binding definitions of rating symbols here? Depending on the subject of the rating and the scope of application, different legal framework conditions apply, which also differ in states of different legal systems. Rating scales are the subject of a development that has lasted for more than a century. Rating agencies continue to develop their scales due to new insights, improved analytical techniques and growing or changing market requirements. Therefore, in each individual case, the evidence of a rating is to be examined as to which statement should be made with a rating. Depending on the time, subject and other conditions, rating symbols are to be interpreted differently. Therefore, we recommend detailed advice. Why are rating agencies not mentioned here by name? It is the responsibility of each rating agency to provide its definitions of rating symbols and, if necessary, to update them. It happens that different rating agencies use the same rating symbols, sometimes with comparable but sometimes with different meanings. The definitions offered by rating agencies need to be questioned because in rare cases the wording of the definitions is ambiguous and promises, for example, a certainty of judgment that we at RATING EVIDENCE can not confirm empirically.