Nordic Credit Rating (NCR) has published proposed revisions to its Financial Institutions Rating Methodology. The document has been updated throughout to improve clarity and conform with current regulations. In addition, several sections dealing with criteria have been revised to reflect regulatory changes, to reduce the number of rating subfactors and improve transparency in our assessment of the operating environment.
We are requesting comments on the proposed amendments and encourage interested parties to provide direct feedback at criteria@nordiccreditrating.com by 7 Apr. 2025. We will review all comments received, with the intention of publishing an anonymised summary of responses and the final methodology once complete.
We will hold two webinars outlining the proposed changes to the methodology. They will be in Norwegian and in Swedish, held on 20 Mar. and 21 Mar. respectively, at 13.00. Sign-up for the Norwegian webinar here, and the Swedish webinar here.
Summary of amendments
The proposed revisions entail:
revising our operating environment assessment, including changes to the determination and weighting of our national, sectoral, regional, and cross-border assessments;
changing our capital assessment guidelines to incorporate new regulations and improve transparency, as well as adding a rating cap option to reflect weak capitalisation;
combining our risk governance and other risks subfactors into one subfactor;
combining our credit risk and market risk subfactors into one subfactor;
introducing capital structure protection adjustments into the long-term issuer rating, by considering uplift to reflect buffers in the form of senior non-preferred debt instruments. This change would align the long-term issuer rating and senior unsecured issue ratings, while ratings on senior non-preferred instruments would be notched down from the issuer rating. Currently, only one rated issuer would be affected by this proposed change;
adding an appendix to explain the impact of environmental, social, and governance factors on our assessment of financial institutions; and
updating text and guidelines throughout the methodology, with the intention of removing outdated references, simplifying text, and improving readability and transparency.
The proposed introduction of capital structure protection adjustments would require amendments to our Covered Bond Rating Methodology, reflecting the alignment of long-term issuer ratings and senior unsecured issue ratings, but would not impact covered bond ratings.
Impact on published ratings
The revisions are not intended to reflect a change in underlying risk drivers. However, they will result in all issuer ratings on financial institutions being placed under criteria review. We do not expect the proposed changes to have a major impact on our existing issuer ratings but acknowledge that a small number could be affected. The criteria review will occur once the proposed methodology is finalised. All ratings affected will be reviewed as soon as possible and no later than six months after publication of the amended methodology.
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com