Viability ratings (VRs) are designed to be internationally comparable and represent Fitch's view as to the intrinsic creditworthiness of an issuer. Together with the agency's support ratings framework, the VR is a key component of a bank's Issuer Default Rating (IDR) and considers various factors including:
• Industry profile and operating environment
• Company profile and risk management
• Financial profile
• Management strategy and corporate governance
VRs are assigned to bank operating companies, bank holding companies and in limited cases, to similar legal entities where it is considered useful to clarify the source of an entity's financial strength. Notably, the VR excludes any extraordinary support that may be derived from outside of the entity as well as excluding potential benefits to a bank's financial position from other extraordinary measures, including a restructuring of liabilities.
Specifically, Fitch would normally regard the following as indicative of a bank failing or becoming non-viable:
• Defaulting on senior obligations
• Entering a resolution regime, bankruptcy, administrative receivership or similar statutory process
• Triggering non-viability clauses embedded in regulatory (or other) capital instruments
• Execution of a distressed debt exchange as defined by Fitch's criteria Receipt of extraordinary support such that a default or other event of non-viability is avoided
VRs represent not only the capacity of a rated entity to meet its obligations in the absence of extraordinary support but also in the absence of extraordinary constraints (e.g., transfer and convertibility risk). As such, VRs represent the capacity of the bank to maintain ongoing operations and to avoid failure, the latter being indicated by extraordinary and company specific measures becoming necessary to protect against a bank's default.
aaa: Highest fundamental credit quality
'aaa' ratings denote the best prospects for ongoing viability and lowest expectation of failure risk. They are assigned only to banks with extremely strong and stable fundamental characteristics, such that they are most unlikely to have to rely on extraordinary support to avoid default. This capacity is highly unlikely to be adversely affected by foreseeable events.
aa: Very high fundamental credit quality
'aa' ratings denote very strong prospects for ongoing viability. Fundamental characteristics are very strong and stable; such that it is considered highly unlikely that the bank would have to rely on extraordinary support to avoid default. This capacity is not significantly vulnerable to foreseeable events.
a: High fundamental credit quality
'a' ratings denote strong prospects for ongoing viability. Fundamental characteristics are strong and stable, such that it is unlikely that the bank would have to rely on extraordinary support to avoid default. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
bbb: Good fundamental credit quality
'bbb' ratings denote good prospects for ongoing viability. The bank's fundamentals are adequate, such that there is a low risk that it would have to rely on extraordinary support to avoid default. However, adverse business or economic conditions are more likely to impair this capacity.
bb: Speculative fundamental credit quality
'bb' ratings denote moderate prospects for ongoing viability. A moderate degree of fundamental financial strength exists, which would have to be eroded before the bank would have to rely on extraordinary support to avoid default. However, an elevated vulnerability exists to adverse changes in business or economic conditions over time.
b: Highly speculative fundamental credit quality
'b' ratings denote weak prospecits for ongoing viability. Material failure risk is present but a limited margin of safety remains. The bank's capacity for continued unsupported operation is vulnerable to deterioration in the business and economic environment.
ccc: Substantial fundamental credit risk
Failure of the bank is a real possibility. The capacity for continued unsupported operation is highly vulnerable to deterioration in the business and economic environment.
cc: Very high levels of fundamental credit risk
Failure of the bank appears probable.
c: Exceptionally high levels of fundamental credit risk
Failure of the bank is imminent or inevitable
f:
'f' ratings indicate an issuer that, in Fitch's opinion, has failed, and that either has defaulted or would have defaulted had it not received extraordinary support or benefited from other extraordinary measures.
Note: The modifiers "+" or "−" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'aaa' VR category or to VR categories below 'b'. Outlooks are not assigned to VRs although at any point in time, a bank's position and prospects may have underlying trends, for example improving, deteriorating or stable.
