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Moody's to offer National Scale Ratings in Saudi

LONDON, April 23, 2019

Moody's Investors Service has announced its intention to offer National Scale Ratings (NSR) in the Saudi Arabia.

Moody's NSRs are ordinal rankings of creditworthiness relative to other credits within a given country, which offer enhanced credit differentiation among local credits.

NSRs are generated from Global Scale Ratings (GSRs) through correspondences, or maps, specific to each country. However, unlike GSRs, Moody's NSRs are not intended to rank credits across multiple countries. Instead, they provide a measure of relative creditworthiness within a single country and typically permit the use of the full range of Moody's 21 rating categories.

"National Scale Ratings are intended to provide greater differentiation among local credits within Saudi Arabia than is available on the global scale," said Monica Merli, Moody's Managing Director - Regional Head EMEA. "Like our Global Scale Ratings, NSRs are based on our independent, transparent and forwarding-looking methodologies, complemented by our analytical resources."

Moody's National Scale Ratings are given a two-letter suffix to distinguish them from the agency's GSRs. NSRs in Saudi Arabia will have the country abbreviation "sa". In Saudi Arabia, whose sovereign rating is currently A1 on the global scale, domestic issuers with GSRs at or above this level can potentially achieve NSRs of Aaa.sa.

NSRs have no inherent absolute meaning in terms of default risk or expected loss. A historical probability of default and/or expected loss consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. However, both the probability of default and the expected loss consistent with that NSR may change if and when a country's national scale is remapped.

Although NSRs are generally higher than their corresponding GSRs – in some cases by multiple notches - they reflect the same degree of credit risk. For example, a Aaa.sa NSR would reflect a broadly similar level of risk as its corresponding A1 GSR. Conversely, the degree of risk indicated by a GSR and the analogous NSR (i.e. A1 and A1.sa) will differ. Consequently, the terms "investment-grade" and "speculative-grade" do not apply to NSRs.

NSR maps may be revised from time to time in order to ensure that they continue to offer adequate differentiation. Sovereign rating changes are likely to be the major driver of re-mapping. A key aim of re-mapping following a sovereign rating change is actually to reduce the impact on NSRs whose corresponding GSRs are affected.

NSRs can be upgraded or downgraded even when their corresponding GSRs do not change. For example, a mapping change or a shift in credit strength that is insufficient to move the GSR can still lead to changes in NSRs.

On the other hand, if a GSR is upgraded or downgraded, this is likely to drive a change in the corresponding NSR, potentially by more than one notch.

Following the publication of the map for Saudi Arabia, Moody's will offer NSRs in 17 countries. – TradeArabia News Service




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