Attachment F — External credit ratingsAttachment F — External credit ratings

Attachment F – External credit ratings

1. An ADI may only use the solicited ratings of ECAIs to determine the credit rating grades that correspond to the risk weights for counterparties and exposures.[19] Ratings must be used consistently for each type of exposure.
2. An ADI must only use an ECAI rating that takes into account and reflects the entire amount of credit risk exposure that the ADI has with regard to all amounts owed to it.
3. Where an ADI uses the ratings of ECAIs, it must perform due diligence to ensure that the external ratings appropriately and conservatively reflect the creditworthiness of the counterparty. If the due diligence analysis reflects higher risk characteristics than that implied by the exposure’s external rating, an ADI must assign a risk weight at least one bucket higher than that determined by the external rating. Due diligence analysis must not result in the application of a lower risk weight than that determined by the external rating.
4. An ADI must not use credit ratings for one entity within a corporate group to determine the risk weight for other entities within the same group. If a rated entity has guaranteed another entity’s exposure to the ADI, the guarantee may be recognised for risk-weighting purposes if the criteria set out in Attachment I to this Prudential Standard are satisfied.