Credit Rating Systems and Capital Reserves

Financial services professionals, consultants, sales professionals interested in providing or selling products and services to banks, investment companies, and other financial corporations, and everyone interested in understanding counterparty credit risks and techniques for their mitigation

Please contact us for information about prerequisites.

Expected Duration
60 minutes

When dealing with other parties, banks and other financial institutions face a variety of risks. The most relevant of these is credit risk. The global expansion of sophisticated products, such as derivatives and a host of other products, has further fueled the rise in transaction values. This poses a real threat to a company’s well-being, regardless of its size. Emerging from the credit crisis of 2007, which saw a number of financial institutions, both large and small, fail due to unmanageable credit losses, it has become paramount for organizations to track and manage credit risk. In addition, new global banking rules are in place to guide various financial institutions towards best practices for credit risk management. Under current international banking regulations, credit ratings of counterparties have become ever more important in determining how much capital reserves financial institutions should set aside to protect themselves from potential counterparty defaults.
This course focuses on external credit rating agencies and the process by which credit ratings are determined. It discusses how credit ratings are used to calculate credit risk, which in turn allows the banks and financial institution to determine how much capital they need to cover their risk. The course also discusses the use of an internal credit rating process to determine capital reserves.


Credit Rating Systems

  • define basic credit rating concepts
  • match external credit rating terms with their definitions
  • describe the basics of credit rating systems

Determining Credit Ratings

  • identify the factors that are considered when analyzing business and financial risk
  • identify key areas that are analyzed when determining credit ratings
  • describe the steps for determining the overall issuer credit rating
  • describe the process for determining credit ratings

Calculating Capital Reserves

  • recognize how external ratings can be used to determine capital reserves
  • recognize how internal ratings can be used to determine capital reserves
  • describe the calculations for determining capital reserves





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