Minimum Capital Requirements for Credit Risk

Regarding the disclosure of conflicts of interest referenced in paragraph 8.3(4) above, at a minimum, the following situations and their influence on the ECAI’s credit rating methodologies or credit rating actions shall be disclosed: (1) The ECAI is being paid to issue a credit rating by the rated entity or by the obligor, originator, underwriter, or arranger of the rated obligation; (2) The ECAI is being paid by subscribers with a financial interest that could be affected by a credit rating action of the ECAI; (3) The ECAI is being paid by rated entities, obligors, originators, underwriters, arrangers, or subscribers for services other than issuing credit ratings or providing access to the ECAI’s credit ratings; (4) The ECAI is providing a preliminary indication or similar indication of credit quality to an entity, obligor, originator, underwriter, or arranger prior to being hired to determine the final credit rating for the entity, obligor, originator, underwriter, or arranger; and (5) The ECAI has a direct or indirect ownership interest in a rated entity or obligor, or a rated entity or obligor has a direct or indirect ownership interest in the ECAI. 8.5 Regarding the disclosure of an ECAI's compensation arrangements referenced in (4) above: (1) An ECAI should disclose the general nature of its compensation arrangements with rated entities, obligors, lead underwriters, or arrangers. (2) When the ECAI receives from a rated entity, obligor, originator, lead underwriter, or arranger compensation unrelated to its credit rating services, the ECAI should disclose such unrelated compensation as a percentage of total annual compensation received from such rated entity, obligor, lead underwriter, or arranger in the relevant credit rating report or elsewhere, as appropriate. (3) An ECAI should disclose in the relevant credit rating report or elsewhere, as appropriate, if it receives 10% or more of its annual revenue from a single client (e.g. a rated entity, obligor, originator, lead underwriter, arranger, or subscriber, or any of their affiliates). Implementation Considerations The mapping of Credit Assessments by ECAIs 8.6 SAMA will be assigning eligible ECAIs’ ratings to the risk weights available under the standardized risk weighting framework, i.e. deciding which rating categories correspond to which risk weights. 8.7 Banks can use the following mapping of ECAIs’ ratings. This mapping will be subject to review by SAMA as appropriate and banks will be informed accordingly. SAMA S&P Moody's Fitch 1 AAA Aaa AAA AA+ Aa1 AA+ AA Aa2 AA AA- Aa3 AA- 2 A+ A1 A+ A A2 A A- A3 A- 3 BBB+ Baa1 BBB+ BBB Baa2 BBB BBB- Baa3 BBB- 4 BB+ Ba1 BB+ BB Ba2 BB BB- Ba3 BB- B+ B1 B+ B B2 B B- B3 B- 5 CCC+ Caa1 CCC+ CCC Caa2 CCC CCC- Caa3 CCC- CC Ca CC C C C D D 6 Unrated Unrated Unrated 8.8 Banks must use the chosen ECAIs and their ratings consistently for all types of exposure where they have been recognized by SAMA as an eligible ECAI, for both risk-weighting and risk management purposes. Banks are not allowed to “cherry-pick” the ratings provided by different ECAIs and to arbitrarily change the use of ECAIs. 8.9 Banks must use the global rating scale provided by the ECAIs consistently for all types of exposures, the use of national rating scales is subject to mapping to the global rating. Multiple external ratings 8.10 If there is only one rating by an ECAI chosen by a bank for a particular exposure, that rating should be used to determine the risk weight of the exposure. 8.11 If there are two ratings by ECAIs chosen by a bank that map into different risk weights, the higher risk weight will be applied.