“Standard & Poor's will only launch the new scale if a critical mass of New Zealand finance entities are willing to come onboard," S&P managing director Paul Stephen says.
The system has been designed for New Zealand finance entities, namely finance companies, building societies, credit unions, and mortgage trusts.
S&P says the ratings will provide an opinion to retail depositors and debenture and other liability holders on relative default risks of these entities.
The proposed rating system will provide an assessment of companies relative to each other, rather than with international peers.
Relative strength comparisons, S&P says, is seen by many as more relevant than comparisons with international peers.
The analytical evaluation of finance entities under its proposed new rating scale will focus on a range of qualitative as well as quantitative rating factors.
In particular, the proposed new scale will involve a detailed analysis of risk mitigants utilised by finance entities to manage factors such as small capital and business concentration.
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