Circular PPB-2007-2-CPB: Recognition of External Credit Assessment Institutions (OECI) (Update September 11, 2007)

rue du Congrès 12-14 | 1000 Brussels t +32 2 220 53 42 | f +32 2 220 54 93 | www.cbfa.be Prudential Policy Brussels, February 8, 2007

CIRCULAR PPB-2007-2-CPB to credit institutions, stock exchange companies, wealth management companies, order execution companies for financial instruments, liquidation bodies and bodies assimilated to liquidation bodies, and to financial companies.

Subject: Recognition of External Credit Assessment Institutions (OECI)

Madam, Sir,

Pursuant to Articles V.12 and VII.4 of the Regulation on the own funds of credit institutions and investment firms of October 17, 2006, external credit assessments published by OECIs may only be used by institutions in the calculation of risk-weighted assets when these institutions have been recognized as eligible by the CBFA.

This circular establishes the list of OECIs recognized as eligible by the CBFA, as well as the correspondence between external credit assessments and credit quality steps.

The following are considered eligible OECIs for the segments indicated:

OECI/Segments	Commercial Entities¹	Public Finances	Securitization
Fitch Ratings	X
Standard & Poor’s Ratings Services		X
Moody’s Investors Service			X

The CBFA, pursuant to Article V.14, §2, authorizes the use of unsolicited ratings from these three agencies.

…/…

1 Including enterprises, establishments, and financial establishments as defined by the Regulation of the Banking, Financial and Insurance Commission of October 17, 2006 concerning the own funds of credit institutions and investment firms.

PPB-2007-2-CPB - 2 rue du Congrès 12-14 | 1000 Brussels t +32 2 220 53 42 | f +32 2 220 54 93 | www.cbfa.be

Pursuant to Articles V.13 and VII.5, the assessments of the eligible OECIs defined above are associated with the following credit quality steps:

Standardized Approach:
Long-term Mapping

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P
1	AAA to AA-	Aaa to Aa3	AAA to AA-
2	A+ to A-	A1 to A3	A+ to A-
3	BBB+ to BBB-	Baa1 to Baa3	BBB+ to BBB-
4	BB+ to BB-	Ba1 to Ba3	BB+ to BB-
5	B+ to B-	B1 to B3	B+ to B-
6	CCC+ and below	Caa1 and below	CCC+ and below

Short-term Mapping

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P
1	F1+, F1	P-1	A-1+, A-1
2	F2	P-2	A-2
3	F3	P-3	A-3
4	Below F3	NP	All short-term ratings below A-3
5
6

Securitization:
Long-term Mapping: Standardized Approach

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P
1	AAA to AA-	Aaa to Aa3	AAA to AA-
2	A+ to A-	A1 to A3	A+ to A-
3	BBB+ to BBB-	Baa1 to Baa3	BBB+ to BBB-
4	BB+ to BB-	Ba1 to Ba3	BB+ to BB-
5	B+ and below	B1 and below	B+ and below

…/…

PPB-2007-2-CPB - 3 rue du Congrès 12-14 | 1000 Brussels t +32 2 220 53 42 | f +32 2 220 54 93 | www.cbfa.be

Long-term Mapping: IRB Approach

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P
1	AAA	Aaa	AAA
2	AA	Aa	AA
3	A+	A1	A+
4	A	A2	A
5	A-	A3	A-
6	BBB+	Baa1	BBB+
7	BBB	Baa2	BBB
8	BBB-	Baa3	BBB-
9	BB+	Ba1	BB+
10	BB	Ba2	BB
11	BB-	Ba3	BB-
Below 11	Below BB-	Below Ba3	Below BB-

Short-term Mapping: Standardized Approach

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P
1	F1+, F1	P-1	A-1+, A-1
2	F2	P-2	A-2
3	F3	P-3	A-3
All other credit assessments	Below F3	NP	All short-term ratings below A-3

Short-term Mapping: IRB Approach

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P
1	F1+, F1	P-1	A-1+, A-1
2	F2	P-2	A-2
3	F3	P-3	A-3
All other credit assessments	Below F3	All short-term ratings below A3, P3, and F3	All short-term ratings below A-3

…/…

PPB-2007-2-CPB - 4 rue du Congrès 12-14 | 1000 Brussels t +32 2 220 53 42 | f +32 2 220 54 93 | www.cbfa.be

Collective Investment Undertakings

Credit Quality Steps	Credit Assessments
	Fitch	Moody’s	S&P - Principal Stability Fund Ratings	S&P - Fund Credit Quality Ratings
1	AAA to AA-	Aaa to Aa3	AAA m to AA- m	AAA f to AA- f
2	A+ to A-	A1 to A3	A+ m to A- m	A+ f to A- f
3	BBB+ to BBB-	Baa1 to Baa3	BBB+ m to BBB- m	BBB+ f to BBB- f
4	BB+ to BB-	Ba1 to Ba3	BB+ m to BB- m	BB+ f to BB- f
5	B+ to B-	B1 to B3	B+ m to B- m	B+ f to B- f
6	CCC+ and below	Caa1 and below	CCC+ m and below	CCC+ f and below

A copy of this circular is sent to your (your) auditor(s).

We ask you to accept, Madam, Sir, the expression of our best sentiments.

The Vice-President,
J-P Servais.