Credit Risk IQ – In Depth
What Do the Industry Reports Analyse?
Credit Benchmark generates forward-looking analyses of default risk across 10,000+ industry reports. These reports span various geographies, industries*, with rated and unrated**, privately and publicly owned entities.
Credit Benchmark dives into the credit risk behaviour of entities within each industry to help you identify key trends and signals at a macro-level. Each credit index is made up of the ratings of individual entities within it. Each entity within the index has a rating or Probability of Default (“PD”).
The credit index forms the aggregated view of the credit risk of those entities as a whole.
* Corporates & Financials are currently available. Please get in touch for information on other types of entities.
** Rated by S&P or Fitch.
How is a Credit Consensus Rating (CCR) Derived?
Large sophisticated banks set their own internal credit risk ratings in order to manage the credit risk of the counterparties they lend to. For example: whether to lend in the first place, how much to lend and how much to charge the counterparty.
Their credit ratings for counterparties are derived by credit risk analysts & statistical modellers taking into account a range of quantitative variables (as an example, for a Corporate this might include leverage and debt ratios from the company’s management and public financial statements) and qualitative factors (which could include for example brand value and stability of management). The ratings are regularly updated to reflect changes in each counterparty’s economic situation.
The ratings help banks manage their risk of non-payment (default or bankruptcy) from a counterparty they have lent to (default risk). These loans typically span many years, so the banks assessments look forward over the next year and evaluate the risk that the counterparty will default1 over the next 12 months.
Each bank has developed & refined its own credit risk assessment & modelling process. Banks each have their own independent validation and review teams, who challenge the processes and review decisions. Banks’ models and rating processes are also subject to review by financial regulators (such as the Fed, EBA, Bank of England) and/or the banks’ own auditors.
Credit Benchmark receives from banks a 1-year forward-looking Probability of Default (PD) linked to the banks’ internal rating.
Credit Benchmark derives a Credit Consensus Rating (CCR) using the following steps:
- These PDs are averaged, to get the average view of the risk of the counterparty defaulting over the next year. This average view is called the consensus because it is a consensus opinion of the default risk of the counterparty.
- The consensus PD is mapped to a letter rating using a custom Credit Benchmark rating scale that has been calibrated using banks’ internal rating scales.
The diagram outlines the process for an example entity.
In this example, five banks have sent a PD for the same counterparty, the average of which is 40 basis points (bps).
Using the custom Credit Benchmark rating scale, this maps to a bbb- Credit Consensus Rating.
By aggregating the view of five banks, the Credit Consensus Rating reflects a more diversified opinion of the credit risk for this entity.
1 Banks contributing to Credit Benchmark follow the Basel definition of Default.
What Do We Mean by Forward-Looking Analyses?
The banks are providing and updating on a regular basis a 1-year forward-looking Probability of Default (PD) which feeds into all our analyses. Looking at the below graph as an example entity, you can see that the PD published for January 2023 of 2 bps is the probability of the entity defaulting between the end of January 2023 and the end of December 2024. Equally, the PD published for December 2023 of 7 bps is the probability of the entity defaulting between the end of December 2023 and the end of November 2024.
Therefore, our Credit Consensus Ratings represent the forward-looking credit view of banks over the next year.
Creating a Unique Legal Entity Identifier
One of the main challenges of creating Credit Consensus Ratings for unique legal entities is ensuring that when bank data is aggregated together, the averaged data pertains to the same legal entity.
Credit Benchmark has invested heavily in the entity mapping and concordance process, using data from FactSet, Thomson Reuters, country specific entity identifier databases and several public sources including the Securities Exchange Commission (SEC) and Global Legal Entity Identifiers (LEI); and the data mapping process is supported by a dedicated team of 25+ members of staff.
Data Validation
As part of the onboarding process for contributing banks, legal, compliance and information security requirements must be met, and a detailed methodology review must be completed to ensure that their planned data contributions are comparable with those from other contributing banks.
The methodology review identifies issues with items such as guarantees and currency mismatches and assesses the comparability of the actual internal credit rating process. The aim of the methodology review is to ensure that any data differences between contributing banks arise from different views of credit risk, rather than from any other reason.
Credit Benchmark does not express any view on individual models, nor does it modify the contributed data in any way.
On an on-going basis quantitative rules are used to identify data inconsistencies or outliers where the Probability of Default value is materially different from other contributions or a previous contribution from the same bank.
Credit Benchmark Rating Scale
| Notch | Consensus 21-Rating | Consensus 7-Rating | Consensus 4-Rating | Consensus 2-Rating | PD Lower Bound bps | PD Mid Point bps | PD Upper Bound bps |
|---|---|---|---|---|---|---|---|
| 1 | aaa | aaa | IGa | IG | 0 | 0.79 | 1.25 |
| 2 | aa+ | aa | IGa | IG | 1.25 | 1.68 | 2.25 |
| 3 | aa | aa | IGa | IG | 2.25 | 2.7 | 3.25 |
| 4 | aa- | aa | IGa | IG | 3.25 | 3.93 | 4.75 |
| 5 | a+ | a | IGa | IG | 4.75 | 5.45 | 6.25 |
| 6 | a | a | IGa | IG | 6.25 | 7.29 | 8.5 |
| 7 | a- | a | IGa | IG | 8.5 | 10.9 | 14 |
| 8 | bbb+ | bbb | IGb | IG | 14 | 17 | 20 |
| 9 | bbb | bbb | IGb | IG | 20 | 24 | 30 |
| 10 | bbb- | bbb | IGb | IG | 30 | 38 | 48 |
| 11 | bb+ | bb | HYb | HY | 48 | 60 | 76 |
| 12 | bb | bb | HYb | HY | 76 | 92 | 112 |
| 13 | bb- | bb | HYb | HY | 112 | 148 | 195 |
| 14 | b+ | b | HYb | HY | 195 | 267 | 365 |
| 15 | b | b | HYb | HY | 365 | 487 | 650 |
| 16 | b- | b | HYb | HY | 650 | 806 | 1,000 |
| 17 | ccc+ | c | HYc | HY | 1,000 | 1,304 | 1,700 |
| 18 | ccc | c | HYc | HY | 1,700 | 2,062 | 2,500 |
| 19 | ccc- | c | HYc | HY | 2,500 | 3,041 | 3,700 |
| 20 | cc | c | HYc | HY | 3,700 | 5,016 | 6,800 |
| 21 | c | c | HYc | HY | 6800 | 8,246 | 10,000 |
| 22 | d | d | d | d | 10,000 | 10,000 | 10,000 |
Industry Classification
In addition to Probability of Default, banks also include other metadata associated with each entity, this includes the banks internal industry classification. Credit Benchmark has developed an industry schema into which the banks’ own industry categories are mapped.
As part of Credit Benchmark’s process for mapping entity level data, Credit Benchmark calculates a consensus industry classification for each entity using the entity-level industry data included in the banks’ data files.
The industry schema provides a hierarchical taxonomy going from broad categorisations (such as the Industry or Super Sector) down to a more granular one (such as Sub Sector).
The Credit Benchmark’s industry schema for Corporates & Financial Institutions is shown below.
| Industry | Super Sector | Sector | Sub Sector |
|---|---|---|---|
| Oil & Gas | Oil & Gas | Oil & Gas Producers | Exploration & Production |
| Oil & Gas | Oil & Gas | Oil & Gas Producers | Integrated Oil & Gas |
| Oil & Gas | Oil & Gas | Oil Equipment, Services & Distribution | Oil Equipment & Services |
| Oil & Gas | Oil & Gas | Oil Equipment, Services & Distribution | Pipelines |
| Oil & Gas | Oil & Gas | Alternative Energy | Alternative Fuels |
| Basic Materials | Basic Resources | Forestry & Paper | Forestry |
| Basic Materials | Basic Resources | Forestry & Paper | Paper |
| Basic Materials | Basic Resources | Industrial Metals & Mining | Aluminum |
| Basic Materials | Basic Resources | Industrial Metals & Mining | Iron & Steel |
| Basic Materials | Basic Resources | Industrial Metals & Mining | Nonferrous Metals |
| Basic Materials | Basic Resources | Mining | Coal |
| Basic Materials | Basic Resources | Mining | General Mining |
| Basic Materials | Basic Resources | Mining | Gold Mining |
| Basic Materials | Basic Resources | Mining | Platinum & Precious Metals |
| Basic Materials | Chemicals | Chemicals | Commodity Chemicals |
| Basic Materials | Chemicals | Chemicals | Specialty Chemicals |
| Industrials | Construction & Materials | Construction & Materials | Building Materials & Fixtures |
| Industrials | Construction & Materials | Construction & Materials | Heavy Construction |
| Industrials | Industrial Goods & Services | Aerospace & Defense | Aerospace |
| Industrials | Industrial Goods & Services | Aerospace & Defense | Defense |
| Industrials | Industrial Goods & Services | Electronic & Electrical Equipment | Electrical Components & Equipment |
| Industrials | Industrial Goods & Services | Electronic & Electrical Equipment | Electronic Equipment |
| Industrials | Industrial Goods & Services | General Industrials | Containers & Packaging |
| Industrials | Industrial Goods & Services | General Industrials | Diversified Industrials |
| Industrials | Industrial Goods & Services | Industrial Engineering | Commercial Vehicles & Trucks |
| Industrials | Industrial Goods & Services | Industrial Engineering | Industrial Machinery |
| Industrials | Industrial Goods & Services | Industrial Transportation | Delivery Services |
| Industrials | Industrial Goods & Services | Industrial Transportation | Marine Transportation |
| Industrials | Industrial Goods & Services | Industrial Transportation | Railroads |
| Industrials | Industrial Goods & Services | Industrial Transportation | Transportation Services |
| Industrials | Industrial Goods & Services | Industrial Transportation | Trucking |
| Industrials | Industrial Goods & Services | Support Services | Business Support Services |
| Industrials | Industrial Goods & Services | Support Services | Business Training & Employment Agencies |
| Industrials | Industrial Goods & Services | Support Services | Financial Administration |
| Industrials | Industrial Goods & Services | Support Services | Industrial Suppliers |
| Industrials | Industrial Goods & Services | Support Services | Waste & Disposal Services |
| Consumer Goods | Automobiles & Parts | Automobiles & Parts | Auto Parts |
| Consumer Goods | Automobiles & Parts | Automobiles & Parts | Automobiles |
| Consumer Goods | Automobiles & Parts | Automobiles & Parts | Tires |
| Consumer Goods | Food & Beverage | Beverages | Brewers |
| Consumer Goods | Food & Beverage | Beverages | Distillers & Vintners |
| Consumer Goods | Food & Beverage | Beverages | Soft Drinks |
| Consumer Goods | Food & Beverage | Food Producers | Farming, Fishing & Plantations |
| Consumer Goods | Food & Beverage | Food Producers | Food Products |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Durable Household Products |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Furnishings |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Home Construction |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Nondurable Household Products |
| Consumer Goods | Personal & Household Goods | Leisure Goods | Consumer Electronics |
| Consumer Goods | Personal & Household Goods | Leisure Goods | Recreational Products |
| Consumer Goods | Personal & Household Goods | Leisure Goods | Toys |
| Consumer Goods | Personal & Household Goods | Personal Goods | Clothing & Accessories |
| Consumer Goods | Personal & Household Goods | Personal Goods | Footwear |
| Consumer Goods | Personal & Household Goods | Personal Goods | Personal Products |
| Consumer Goods | Personal & Household Goods | Tobacco | Tobacco |
| Health Care | Health Care | Health Care Equipment & Services | Health Care Providers |
| Health Care | Health Care | Health Care Equipment & Services | Medical Equipment |
| Health Care | Health Care | Health Care Equipment & Services | Medical Supplies |
| Health Care | Health Care | Pharmaceuticals & Biotechnology | Biotechnology |
| Health Care | Health Care | Pharmaceuticals & Biotechnology | Pharmaceuticals |
| Consumer Services | Media | Media | Broadcasting & Entertainment |
| Consumer Services | Media | Media | Media Agencies |
| Consumer Services | Media | Media | Publishing |
| Consumer Services | Retail | Food & Drug Retailers | Drug Retailers |
| Consumer Services | Retail | Food & Drug Retailers | Food Retailers & Wholesalers |
| Consumer Services | Retail | General Retailers | Apparel Retailers |
| Consumer Services | Retail | General Retailers | Broadline Retailers |
| Consumer Services | Retail | General Retailers | Home Improvement Retailers |
| Consumer Services | Retail | General Retailers | Specialized Consumer Services |
| Consumer Services | Retail | General Retailers | Specialty Retailers |
| Consumer Services | Travel & Leisure | Travel & Leisure | Airlines |
| Consumer Services | Travel & Leisure | Travel & Leisure | Gambling |
| Consumer Services | Travel & Leisure | Travel & Leisure | Hotels |
| Consumer Services | Travel & Leisure | Travel & Leisure | Recreational Services |
| Consumer Services | Travel & Leisure | Travel & Leisure | Restaurants & Bars |
| Consumer Services | Travel & Leisure | Travel & Leisure | Travel & Tourism |
| Telecommunications | Telecommunications | Fixed Line Telecommunications | Fixed Line Telecommunications |
| Telecommunications | Telecommunications | Mobile Telecommunications | Mobile Telecommunications |
| Utilities | Utilities | Electricity | Alternative Electricity |
| Utilities | Utilities | Electricity | Conventional Electricity |
| Utilities | Utilities | Gas, Water & Multi-utilities | Gas Distribution |
| Utilities | Utilities | Gas, Water & Multi-utilities | Multi-utilities |
| Utilities | Utilities | Gas, Water & Multi-utilities | Water |
| Technology | Technology | Software & Computer Services | Computer Services |
| Technology | Technology | Software & Computer Services | Internet |
| Technology | Technology | Software & Computer Services | Software |
| Technology | Technology | Technology Hardware & Equipment | Computer Hardware |
| Technology | Technology | Technology Hardware & Equipment | Electronic Office Equipment |
| Technology | Technology | Technology Hardware & Equipment | Semiconductors |
| Technology | Technology | Technology Hardware & Equipment | Telecommunications Equipment |
| Super Sector | Sector | Sub Sector |
|---|---|---|
| Banks | Banks | Banks |
| Financial Services | Financial Services | Asset Managers |
| Financial Services | Financial Services | Consumer Finance |
| Financial Services | Financial Services | Investment Services |
| Financial Services | Financial Services | Mortgage Finance |
| Financial Services | Financial Services | Specialty Finance |
| Insurance | Life Insurance | Life Insurance |
| Insurance | Nonlife Insurance | Full Line Insurance |
| Insurance | Nonlife Insurance | Insurance Brokers |
| Insurance | Nonlife Insurance | Monoline Insurance |
| Insurance | Nonlife Insurance | Property & Casualty Insurance |
| Insurance | Nonlife Insurance | Reinsurance |
| Real Estate | Real Estate Investment & Services | Real Estate Holding & Development |
| Real Estate | Real Estate Investment & Services | Real Estate Services |
| Real Estate | Real Estate Investment Trusts | Diversified REITs |
| Real Estate | Real Estate Investment Trusts | Hotel & Lodging REITs |
| Real Estate | Real Estate Investment Trusts | Industrial & Office REITs |
| Real Estate | Real Estate Investment Trusts | Mortgage REITs |
| Real Estate | Real Estate Investment Trusts | Residential REITs |
| Real Estate | Real Estate Investment Trusts | Retail REITs |
| Real Estate | Real Estate Investment Trusts | Specialty REITs |
Corporates
| Industry | Super Sector | Sector | Sub Sector |
|---|---|---|---|
| Oil & Gas | Oil & Gas | Oil & Gas Producers | Exploration & Production |
| Oil & Gas | Oil & Gas | Oil & Gas Producers | Integrated Oil & Gas |
| Oil & Gas | Oil & Gas | Oil Equipment, Services & Distribution | Oil Equipment & Services |
| Oil & Gas | Oil & Gas | Oil Equipment, Services & Distribution | Pipelines |
| Oil & Gas | Oil & Gas | Alternative Energy | Alternative Fuels |
| Basic Materials | Basic Resources | Forestry & Paper | Forestry |
| Basic Materials | Basic Resources | Forestry & Paper | Paper |
| Basic Materials | Basic Resources | Industrial Metals & Mining | Aluminum |
| Basic Materials | Basic Resources | Industrial Metals & Mining | Iron & Steel |
| Basic Materials | Basic Resources | Industrial Metals & Mining | Nonferrous Metals |
| Basic Materials | Basic Resources | Mining | Coal |
| Basic Materials | Basic Resources | Mining | General Mining |
| Basic Materials | Basic Resources | Mining | Gold Mining |
| Basic Materials | Basic Resources | Mining | Platinum & Precious Metals |
| Basic Materials | Chemicals | Chemicals | Commodity Chemicals |
| Basic Materials | Chemicals | Chemicals | Specialty Chemicals |
| Industrials | Construction & Materials | Construction & Materials | Building Materials & Fixtures |
| Industrials | Construction & Materials | Construction & Materials | Heavy Construction |
| Industrials | Industrial Goods & Services | Aerospace & Defense | Aerospace |
| Industrials | Industrial Goods & Services | Aerospace & Defense | Defense |
| Industrials | Industrial Goods & Services | Electronic & Electrical Equipment | Electrical Components & Equipment |
| Industrials | Industrial Goods & Services | Electronic & Electrical Equipment | Electronic Equipment |
| Industrials | Industrial Goods & Services | General Industrials | Containers & Packaging |
| Industrials | Industrial Goods & Services | General Industrials | Diversified Industrials |
| Industrials | Industrial Goods & Services | Industrial Engineering | Commercial Vehicles & Trucks |
| Industrials | Industrial Goods & Services | Industrial Engineering | Industrial Machinery |
| Industrials | Industrial Goods & Services | Industrial Transportation | Delivery Services |
| Industrials | Industrial Goods & Services | Industrial Transportation | Marine Transportation |
| Industrials | Industrial Goods & Services | Industrial Transportation | Railroads |
| Industrials | Industrial Goods & Services | Industrial Transportation | Transportation Services |
| Industrials | Industrial Goods & Services | Industrial Transportation | Trucking |
| Industrials | Industrial Goods & Services | Support Services | Business Support Services |
| Industrials | Industrial Goods & Services | Support Services | Business Training & Employment Agencies |
| Industrials | Industrial Goods & Services | Support Services | Financial Administration |
| Industrials | Industrial Goods & Services | Support Services | Industrial Suppliers |
| Industrials | Industrial Goods & Services | Support Services | Waste & Disposal Services |
| Consumer Goods | Automobiles & Parts | Automobiles & Parts | Auto Parts |
| Consumer Goods | Automobiles & Parts | Automobiles & Parts | Automobiles |
| Consumer Goods | Automobiles & Parts | Automobiles & Parts | Tires |
| Consumer Goods | Food & Beverage | Beverages | Brewers |
| Consumer Goods | Food & Beverage | Beverages | Distillers & Vintners |
| Consumer Goods | Food & Beverage | Beverages | Soft Drinks |
| Consumer Goods | Food & Beverage | Food Producers | Farming, Fishing & Plantations |
| Consumer Goods | Food & Beverage | Food Producers | Food Products |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Durable Household Products |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Furnishings |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Home Construction |
| Consumer Goods | Personal & Household Goods | Household Goods & Home Construction | Nondurable Household Products |
| Consumer Goods | Personal & Household Goods | Leisure Goods | Consumer Electronics |
| Consumer Goods | Personal & Household Goods | Leisure Goods | Recreational Products |
| Consumer Goods | Personal & Household Goods | Leisure Goods | Toys |
| Consumer Goods | Personal & Household Goods | Personal Goods | Clothing & Accessories |
| Consumer Goods | Personal & Household Goods | Personal Goods | Footwear |
| Consumer Goods | Personal & Household Goods | Personal Goods | Personal Products |
| Consumer Goods | Personal & Household Goods | Tobacco | Tobacco |
| Health Care | Health Care | Health Care Equipment & Services | Health Care Providers |
| Health Care | Health Care | Health Care Equipment & Services | Medical Equipment |
| Health Care | Health Care | Health Care Equipment & Services | Medical Supplies |
| Health Care | Health Care | Pharmaceuticals & Biotechnology | Biotechnology |
| Health Care | Health Care | Pharmaceuticals & Biotechnology | Pharmaceuticals |
| Consumer Services | Media | Media | Broadcasting & Entertainment |
| Consumer Services | Media | Media | Media Agencies |
| Consumer Services | Media | Media | Publishing |
| Consumer Services | Retail | Food & Drug Retailers | Drug Retailers |
| Consumer Services | Retail | Food & Drug Retailers | Food Retailers & Wholesalers |
| Consumer Services | Retail | General Retailers | Apparel Retailers |
| Consumer Services | Retail | General Retailers | Broadline Retailers |
| Consumer Services | Retail | General Retailers | Home Improvement Retailers |
| Consumer Services | Retail | General Retailers | Specialized Consumer Services |
| Consumer Services | Retail | General Retailers | Specialty Retailers |
| Consumer Services | Travel & Leisure | Travel & Leisure | Airlines |
| Consumer Services | Travel & Leisure | Travel & Leisure | Gambling |
| Consumer Services | Travel & Leisure | Travel & Leisure | Hotels |
| Consumer Services | Travel & Leisure | Travel & Leisure | Recreational Services |
| Consumer Services | Travel & Leisure | Travel & Leisure | Restaurants & Bars |
| Consumer Services | Travel & Leisure | Travel & Leisure | Travel & Tourism |
| Telecommunications | Telecommunications | Fixed Line Telecommunications | Fixed Line Telecommunications |
| Telecommunications | Telecommunications | Mobile Telecommunications | Mobile Telecommunications |
| Utilities | Utilities | Electricity | Alternative Electricity |
| Utilities | Utilities | Electricity | Conventional Electricity |
| Utilities | Utilities | Gas, Water & Multi-utilities | Gas Distribution |
| Utilities | Utilities | Gas, Water & Multi-utilities | Multi-utilities |
| Utilities | Utilities | Gas, Water & Multi-utilities | Water |
| Technology | Technology | Software & Computer Services | Computer Services |
| Technology | Technology | Software & Computer Services | Internet |
| Technology | Technology | Software & Computer Services | Software |
| Technology | Technology | Technology Hardware & Equipment | Computer Hardware |
| Technology | Technology | Technology Hardware & Equipment | Electronic Office Equipment |
| Technology | Technology | Technology Hardware & Equipment | Semiconductors |
| Technology | Technology | Technology Hardware & Equipment | Telecommunications Equipment |
Financials
| Super Sector | Sector | Sub Sector |
|---|---|---|
| Banks | Banks | Banks |
| Financial Services | Financial Services | Asset Managers |
| Financial Services | Financial Services | Consumer Finance |
| Financial Services | Financial Services | Investment Services |
| Financial Services | Financial Services | Mortgage Finance |
| Financial Services | Financial Services | Specialty Finance |
| Insurance | Life Insurance | Life Insurance |
| Insurance | Nonlife Insurance | Full Line Insurance |
| Insurance | Nonlife Insurance | Insurance Brokers |
| Insurance | Nonlife Insurance | Monoline Insurance |
| Insurance | Nonlife Insurance | Property & Casualty Insurance |
| Insurance | Nonlife Insurance | Reinsurance |
| Real Estate | Real Estate Investment & Services | Real Estate Holding & Development |
| Real Estate | Real Estate Investment & Services | Real Estate Services |
| Real Estate | Real Estate Investment Trusts | Diversified REITs |
| Real Estate | Real Estate Investment Trusts | Hotel & Lodging REITs |
| Real Estate | Real Estate Investment Trusts | Industrial & Office REITs |
| Real Estate | Real Estate Investment Trusts | Mortgage REITs |
| Real Estate | Real Estate Investment Trusts | Residential REITs |
| Real Estate | Real Estate Investment Trusts | Retail REITs |
| Real Estate | Real Estate Investment Trusts | Specialty REITs |
Access the Industry Reports for free to see what Credit Consensus Ratings can offer.
