Fedafin’s methodologies for credit ratings of banks, insurance companies, and real estate companies have been revised. The structure of the rating documentation was also slightly modified. The most significant adjustments to the different methodologies relate to:

• Revision of the respective set of key figures in the financial risk profile: The evaluation of key figures in the financial risk profile was comprehensively reviewed and revised. In the methodology for banks, adjustments were made in particular in the area of asset quality. In the methodology for real estate companies, adjustments concern profitability figures and the systematic consideration of company size.
• Definition of the stand-alone profile: The previous stand-alone rating, which included explicit guarantees and support factors from the public sector or other third parties, has been replaced by the stand-alone profile. The stand-alone profile is defined as the creditworthiness of a company independent of extraordinary support or guarantees from the public sector or other support providers. This is a harmonization with definitions of other credit rating agencies and results in better comparability. The more distinct separation between issuer and owner/support provider can have an impact on the stand-alone profile in particular for public sector entities. For private sector issuers, the stand-alone profile is usually unaffected as they do not usually profit from extraordinary support or guarantees. These adjustments have no impact on issuer ratings.
• Revised recovery analysis for real estate companies: The procedure for analyzing the expected recovery of an issuer has been comprehensively reviewed and revised. The distinction between the issuer credit profile (creditworthiness of the issuer) and the issuer rating (expected loss rating for senior unsecured liabilities) is now explicit. As the issuer rating also previously reflected the expected loss for senior unsecured liabilities, this has no effect on the rating.
• A differentiated presentation of the rating factors in modules: Factors relevant to credit ratings are presented in a more differentiated and transparent manner in clearly distinguished modules. This increases the comprehensibility of the rating assignment. Assessments of the individual modules are now explicitly shown on the rating documentation.

The implementation for cantonal banks took place at the beginning of March 2024, whereas for private sector banks, insurance companies, and real estate companies, implementation will take place with the rating updates for the 2023 financial year. Documents and details on the revision are available here.