Moody's announces bank rating actions for Trinidad and Tobago resulting from implementation of JDA and BFSR methodologies
New York, April 27, 2007 -- Moody's Investors Service today published the rating results for banks
in Trinidad and Tobago as part of the application of its refined joint
default analysis (JDA) and updated bank financial strength rating (BFSR)
BFSRs evaluate the stand-alone or intrinsic financial strength
of banks without reference to external support factors. BFSRs are
the starting point of Moody's bank credit analysis, and are an important
determinant of Moody's bank deposit and debt ratings.
Moody's then uses its JDA methodology to incorporate the potential for
external support into a bank's local currency deposit rating. The
potential for external support can reduce the riskiness of a bank's deposit
and debt obligations; however, such support is often uncertain.
Moody's uses conservative support assumptions and a limited number of
support levels to ensure that sufficient weight is given to a bank's intrinsic
financial strength in its bank deposit and debt ratings.
Moody's uses deposit ratings to determine bank debt ratings based on its
notching guidelines for bank securities. Ratings for foreign currency
obligations are determined after considering Moody's country ceilings
for foreign currency ratings.
The methodologies are being implemented country by country, with
results being announced on a weekly basis. Results for those banks
with a parent bank located in another country where the methodologies
have not yet been implemented will be concluded at the same time as that
of the parent.
The updated BFSR methodology has benefited the BFSR of First Citizens
Bank Limited, the only bank Moody's rates in Trinidad and
Tobago, whose BFSR was upgraded to C- (minus) from D+
(plus). Solidly improving financial fundamentals combined with
a benign operating and regulatory environment were the main drivers of
Moody's assigns support levels to banks in Trinidad and Tobago using
its high country support guideline and A1 local currency deposit ceiling.
The country support guideline takes into consideration the historic evidence
of support for banks in addition to the size, strength, and
the degree of fragmentation of the Trinidadian banking system.
Based on this framework, First Citizens' local currency deposit
rating was affirmed at A1. The rating incorporates Moody's
view that its deposits and senior debt would be fully supported by the
system, because of First Citizens' government ownership and
the importance of its deposit franchise, the second largest in Trinidad
The rating for First Citizens (St. Lucia) Ltd's senior unsecured
foreign currency bonds, 100% guaranteed by First Citizens
Bank Limited, is also affirmed at A1. The debt rating is
based on the A1 local currency deposit rating, and is at the A1
Trinidad and Tobago country ceiling for bonds and notes.
This press release lists the names of issuers in Trinidad and Tobago whose
ratings have been changed, affirmed, or put on review.
To view ratings changes and other documents explaining Moody's bank rating
methodologies, please go to www.moodys.com/JDABanks.
The specific ratings changes and/or affirmations are as follows:
First Citizens Bank Limited: The BFSR is raised to C- (minus)
from D+ (plus). The Local Currency Deposit Rating is affirmed
at A1, which represents the full support of the system. The
Long Term Foreign Currency Deposit Rating is affirmed at Baa1 and remains
constrained by Trinidad and Tobago's country ceiling for deposits.
First Citizens (St. Lucia) Ltd: The Senior Unsecured Foreign
Currency Bond Rating is affirmed at A1, at the Trinidad and Tobago
country ceiling for bonds and notes.
ABOUT MOODY'S BANK RATINGS
Bank Financial Strength Rating
Moody's Bank Financial Strength Ratings (BFSRs) represent Moody's opinion
of a bank's intrinsic safety and soundness and, as such, exclude
certain external credit risks and credit support elements that are addressed
by Moody's Bank Deposit Ratings. Bank Financial Strength Ratings
do not take into account the probability that the bank will receive such
external support, nor do they address risks arising from sovereign
actions that may interfere with a bank's ability to honor its domestic
or foreign currency obligations. Factors considered in the assignment
of Bank Financial Strength Ratings include bank-specific elements
such as financial fundamentals, franchise value, and business
and asset diversification. Although Bank Financial Strength Ratings
exclude the external factors specified above, they do take into
account other risk factors in the bank's operating environment,
including the strength and prospective performance of the economy,
as well as the structure and relative fragility of the financial system,
and the quality of banking regulation and supervision.
Global Local Currency Deposit Rating
A deposit rating, as an opinion of relative credit risk, incorporates
the Bank Financial Strength Rating as well as Moody's opinion of any external
support. Specifically, Moody's Bank Deposit Ratings are opinions
of a bank's ability to repay punctually its deposit obligations.
As such, Moody's Global Local Currency Bank Deposit Ratings are
intended to incorporate those aspects of credit risk relevant to the prospective
payment performance of rated banks with respect to local currency deposit
obligations, and include: intrinsic financial strength and
both implicit and explicit external support elements. Moody's Bank
Deposit Ratings do not take into account the benefit of deposit insurance
schemes which make payments to depositors, but they do recognize
the potential support from schemes that may provide assistance to banks
Foreign Currency Deposit Rating
Moody's ratings on foreign currency bank obligations derive from the bank's
local currency rating for the same class of obligation. The implementation
of JDA for banks can lead to a high local currency ratings for certain
banks, which could also produce high foreign currency ratings.
Nevertheless, it should be reminded that foreign currency deposit
ratings are in all cases constrained by the country ceiling for foreign
currency bank deposits. This may result in the assignment of a
different, and typically lower, rating for the foreign currency
deposits relative to the bank's rating for local currency obligations.
Foreign Currency Debt Rating
Foreign currency debt ratings are derived from the bank's local currency
debt rating for the same class of obligation. In a similar way
to foreign currency deposit ratings, foreign currency debt obligations
may also be constrained by the country ceiling for foreign currency bonds
and notes, however, in some cases the ratings on foreign currency
debt obligations may be allowed to pierce the foreign currency ceiling.
A particular mix of rating factors are taken into consideration in order
to assess whether a foreign currency bond rating pierces the country ceiling.
They include the issuer's global local currency rating, the foreign
currency government bond rating, the country ceiling for bonds,
and the debt's eligibility to pierce that ceiling.
National Scale Rating
National scale ratings are intended primarily for use by domestic investors
and are not comparable to Moody's globally applicable ratings; rather
they address relative credit risk within a given country. An Aaa
rating on Moody's National Scale indicates an issuer or issue with the
strongest creditworthiness and the lowest likelihood of credit loss relative
to other domestic issuers. National Scale Ratings, therefore,
rank domestic issuers relative to each other and not relative to absolute
default risks. National ratings isolate systemic risks; they
do not address loss expectation associated with systemic events that could
affect all issuers, even those that receive the highest ratings
on the National Scale.
Jeanne Del Casino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
M. Celina Vansetti
Senior Vice President
Financial Institutions Group
Moody's Investors Service