Developed specifically for building societies, the procedure applied by GBB-Rating produces an objective, verifiable and professional credit assessment that pays due regard to the subject's individual characteristics while focusing on a forward-looking analysis.
Alongside the prevailing statutory, political and socio-economic climate, the comprehensive evaluation gives appropriate consideration in particular to the specific characteristics of the building society and collective business. Quantitative and qualitative methods are employed to examine building society-specific indicators (e.g. deposit investment ratios and termination, allocation deferral and cancellation rates) on the one hand, and special assessment criteria (e.g. funding structure, pool management) on the other.
The (long-term credit) rating of buildings societies rating is based on an analysis and evaluation of material quantitative and qualitative aspects of the financial and business profiles, performed using a system of indicators and criteria.
In order to ensure objective, uniform and expert rating analyses and evaluations, the rating procedure is governed by detailed internal directives and policies.
In principle, the procedure is designed for the purpose of assessing legally independent institutions that are active in the markets – operating as going concerns. Special factors exerting an influence on the rating, such as particularities relating to the (group's) home country, or institutions undergoing orderly resolution, are mapped and evaluated by way of supplemental attributes.
The rating result is assigned to one of 22 grades (AAA to D) and supplemented by a rating outlook (rating scale).
The intermediate scores arising from the analysis of the financial and business profiles are weighted and finally aggregated to obtain an overall score. Given the forward-looking nature of the business profile, it carries greater weight in the rating result.
Practice has demonstrated the ability of the GBB rating system to reflect and assess different business structures appropriately and in a comparable manner.
The financial profile is evaluated by analyzing financial strength, as expressed by long-term earning capacity and the capital available to cover risks. Indicators and qualitative criteria are applied to assess the relevant financial position and financial performance, and developments and changes are analyzed from a past, current and future perspective. Key sources of information are, in particular, annual and quarterly reports, planning information and disclosures (e.g. medium-term plan, scenario analyses, CRD IV reports).
When examining the "long-term earnings position", the main issue concerns the entity's ability to generate earnings long-term in order to shield against risk and implement the strategy or requirements arising from the business model.
The key issue addressed when examining the "sustained capital position" is the adequacy of the existing and future funding or capital availability and structure in view of current and future, possibly increasing, requirements arising from the business profile (in particular strategy and risk profile), regulatory requirements and rules.
In order to differentiate the risk orientation of individual business models, financial institutions are assigned to one of two groups or clusters on the basis of statistical analyses. The rating methodology for banks and building societies makes a distinction between two clusters, focusing on operational risk/market price risks on the one hand, and credit and counterparty credit risks on the other. The two clusters have different indicator systems and definitions, and different cluster functions determined on the basis of statistical methods.
Examining the business profile focuses on analyzing relevant success and risk factors, while giving consideration to the institution's development (from a past, current and future perspective). The assessment analyzes chiefly qualitative and forward-looking external and internal influencing factors. Criteria concerning the issues of strategy, the market, risk management, risk profile and capitalization potential are evaluated. Supporting indicators are used to perform plausibility checks on the analyses and evaluations.
The assessed attributes are integrated according to a defined standard, which can be adjusted for business model particularities. This strategy achieves the necessary objectivity while offering the flexibility required to give appropriate consideration to specific features.
Alongside the relevant particularities, especially those relating to the sector, institution and business model, the success and risk factors governing building societies are analyzed and consolidated to obtain a forward-looking and verifiable overall judgment.
Any questions on the rating procedure for building societies?
If you have any questions about our rating procedure, or wish to obtain an informative credit rating for your own institution from GBB-Rating, we will be pleased to arrange a personal appointment (Contact
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