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Summary of Amended Mapping of DBRS Credit Assessments under the Standardised Approach

Core Content

This report outlines the mapping of DBRS credit assessments under the Standardised Approach (SA) in accordance with the Commission Implementing Regulation (EU) 2016/1799. The mapping was conducted by the Joint Committee (JC) and is based on the methodology and benchmarks set out in the Implementing Regulation. The report updates the mapping previously published on 11 November 2015 and reflects new quantitative data collected after the submission of the draft Implementing Technical Standards (ITS) to the European Commission.

Main Ratings Scales

DBRS provides credit ratings across several scales, including:

• Long-term obligations rating scale
• Commercial paper and short-term debt rating scale
• Financial strength rating scale

The Credit Fund Rating Scale and Expected Loss Rating Scale are excluded from the mapping as they are not considered valid credit ratings under Regulation (EC) No 1060/2009 (CRA).

Key Points of the Mapping

1. Mapping Methodology

• The mapping is based on the methodology outlined in the Implementing Regulation, which includes:
  • Quantitative factors: Long-run and short-run default rates.
  • Qualitative factors: Meaning and relative position of rating categories.
  • Benchmarks: Defined in the Implementing Regulation to guide the mapping process.

2. Long-term Obligations Rating Scale

• The mapping was derived in two stages:
  • Stage 1: Based on long-run default rates and benchmark intervals.
  • Stage 2: Review of short-run default rates and qualitative factors.
• The mapping for the long-term obligations rating scale is shown in Figure 1:
  • AAA → CQS 1
  • AA → CQS 1
  • A → CQS 2
  • BBB → CQS 3
  • BB → CQS 4
  • B → CQS 5
  • CCC → CQS 6
  • CC → CQS 6
  • C → CQS 6
  • D → CQS 6

3. Commercial Paper and Short-term Debt Rating Scale

• This scale is indirectly mapped based on the internal relationship between short-term and long-term ratings.
• The mapping is derived from the most frequent CQS assigned to the related long-term rating categories, with CQS 4 being used when the most frequent step is CQS 5 or 6.
• The proposed mapping for each short-term rating category is as follows:
  • R-1 H → CQS 1
  • R-1 M → CQS 1
  • R-1 L → CQS 2
  • R-2 H → CQS 3
  • R-2 M → CQS 3
  • R-2 L → CQS 3
  • R-3 → CQS 3
  • R-4 → CQS 4
  • R-5 → CQS 4
  • D → CQS 4

4. Financial Strength Rating Scale

• The mapping is based on the relationship with the long-term obligations rating scale.
• The mapping for this scale is shown in Figure 16 of Appendix 4, and each rating category is mapped based on its meaning, relative position, and the mapping of corresponding long-term categories.

Additional Information

• The mapping tables are included in Appendix 4 and specified in Annex III of the revised draft ITS.
• Withdrawn ratings are weighted at 50% as per Article 4(3) of the ITS.
• The default definition used by DBRS is detailed in Appendix 2 and was applied in the calculation of default rates.
• The Credit Fund Rating Scale and Expected Loss Rating Scale are not included in the mapping due to regulatory exclusion.
• The Claims Paying Ability Rating Scale has been replaced by the Financial Strength Rating Scale.
• The long-term and short-term deposit ratings and critical obligation ratings are additional rating types introduced by DBRS.

Conclusion

The mapping reflects a balance between prudential and market considerations, ensuring consistency and comparability of DBRS ratings with the regulatory scales defined under the CRR. It is based on updated quantitative data and maintains the qualitative factors outlined in the Implementing Regulation. The mapping ensures that the risk weights assigned to each category under the SA are aligned with the regulatory framework.