Jurisdiction(s):
United Kingdom

Credit rating agency methodologies: UK legal framework, rationale, disclosure and validation duties under the assimilated CRA Regulation and Delegated Regulation 447/2012

Published by a LexisNexis Financial Services expert

Practice notes

What is a credit rating agency methodology?

A credit rating agency (CRA) methodology is the set of policies, processes and criteria a CRA uses when assigning or updating a credit rating.

CRAs issue three principal categories of ratings:

ratings of corporates
ratings of sovereigns
ratings of securities issued through a securitisation or comparable transaction (structured securities), where a special purpose vehicle (SPV) holds a pool of assets and payments to investors depend on cash flows from those assets

A credit rating for a corporate or sovereign generally reflects an evaluation of:

the stand-alone credit strength of the entity prior to any external support
any external assistance that could be available if the entity encounters financial stress
the particular financial instruments being rated

A credit rating for structured securities typically considers:

the credit quality of the underlying assets
legal and regulatory risks linked to the transaction’s structure
if, as is often the case, a number of separate series (or tranches) of securities have been...

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Web page updated on 21/05/2026

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