Credit Risk IQ – In Depth

What Do the Industry Reports Analyse?

Credit Benchmark generates forward-looking analyses of default risk across 5,000+ 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 Bloomberg, Dun & Bradstreet, 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 4.03 5
5 a+ a IGa IG 5 5.81 6.75
6 a a IGa IG 6.75 7.57 8.5
7 a- a IGa IG 8.5 10.91 14
8 bbb+ bbb IGb IG 14 16.73 20
9 bbb bbb IGb IG 20 24.49 30
10 bbb- bbb IGb IG 30 37.95 48
11 bb+ bb HYb HY 48 60.4 76
12 bb bb HYb HY 76 92.26 112
13 bb- bb HYb HY 112 147.78 195
14 b+ b HYb HY 195 266.79 365
15 b b HYb HY 365 487.08 650
16 b- b HYb HY 650 806.23 1000
17 ccc+ c HYc HY 1000 1303.84 1700
18 ccc c HYc HY 1700 2061.55 2500
19 ccc- c HYc HY 2500 3041.38 3700
20 cc c HYc HY 3700 5015.97 6800
21 c c HYc HY 6800 8246.21 10000
22 d d d d 10000 10000 10000

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

If you are interested in seeing what Credit Consensus Ratings can offer, sign-up here to access the Industry Reports for free.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.