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TMI BlogGuidelines for Enhanced Disclosures by Credit Rating Agencies (CRAs)X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawn rating shall be included in the computation of default rates till the completion of the cohort or the maturity of the instrument, whichever is earlier. Accordingly, all DTs shall continue to report any delays/ default in payment on debentures to the CRA(s) having rated the said debenture for the lifetime of the instrument, irrespective of the rating on that instrument being withdrawn. c. Ratings of non-cooperative issuers shall be included in the cohort under the rating category in which the instrument is currently being rated. B. Based on the above approach, a CRA shall disclose, on an annual basis, the average one-year, two-year and three-year cumulative default rates (based on weighted average) each for: a. Last 10-financial years period (Long-run average default rates) b. 24, 36 and 48 most recent cohorts, respectively (Short-run average default rates) C. The format of the above disclosures is specified at Annexure A . Consequently, Annexure B. VII of SEBI Circular SEBI/HO/MIRSD/ DOP2/CIR/P/2018/86 dated May 30, 2018 stands deleted. D. The above disclosures shall be made on a consolidated basis for all financial i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain permitted tolerance levels: i. For AAA: Zero for 1-year and 2-year default rate. Zero for 3-year default rate, with a tolerance level of 1%. ii. For AA: Zero for 1-year default rate. Zero for 2-year default rate with a tolerance level of 2%. iii. For A: Zero for 1-year default rate with a tolerance level of 3%. g. For ratings on non-structured instruments, various instruments of an issuer with equal seniority level and having same rating shall not be included separately for default rate calculation. However, various instruments of an issuer having different seniority levels shall be included as separate instances, subject to a cap of three instances across all rating categories put together. h. For ratings on structured instruments, various instruments, issued by a trust, with the same degree of seniority and hence having same rating shall not be included separately for default rate calculation. However, various instruments, issued by a trust, having different seniority levels shall be included as separate instances. Further, in order to avoid under-estimation of defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs i.e. unsupported ratings without factoring in the explicit credit enhancement and supported rating after factoring in the explicit credit enhancement shall be disclosed in the Press release. Further, the Press Release shall also contain a detailed explanation of all the covenants of the instrument. c. The CRAs shall devise a model to assess the adequacy of credit enhancement structure under various scenarios including stress scenarios. Such assessment shall also be disclosed in the press release regarding the rating action. V. Disclosure of rating sensitivities in press release A. The disclosure of factors to which the rating is sensitive, is critical for the end-users to understand the factors that would have the potential to impact the credit worthiness of the entity. Accordingly, in order to improve transparency, the CRA shall have a specific section on Rating Sensitivities in the Press Release which shall explain the broad level of operating and/ or financial performance levels that could trigger a rating change, upward and downward. Such factors shall be disclosed in quantitative terms to the extent possible, discernible to the investors, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA A BBB BB B C ANNEXURE A.2. Long-run average default rates for short term instruments Rating Category 1-Year Default Rate A1+ A1 A2 A3 A4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. BBB (CE) - Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. BB (CE) - Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations. B (CE) - Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations. C (CE) - Instruments with this rating are considered to have very high likelihood of default regarding timely payment of financial obligations. D (CE) - Instruments with this rating are in default or are expected to be in default soon. Modifiers { + (plus) / - (minus)} can be used with the rating symbols for the categories AA (CE) to C (CE). The modi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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