Rating Symbols and Definitions

JUNE 2013

MARCH 2008
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RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 1

Table of Contents

Preface 2

Moody’s Standing Committee on 

Rating Symbols and Definitions 3

Credit Rating Services 4

Moody’s Global Rating Scales ............................................4

Linkage Between the Global Long-Term and 

Short-Term Rating Scales.....................................................6

Obligations and Issuers Rated on the Global 

Long-Term and Short-Term Rating Scales ......................... 7

US Municipal Short-Term Debt and Demand 

Obligation Ratings............................................................... 10

National Scale Long-Term Ratings.................................... 12

National Scale Short-Term Ratings................................... 13

Probability of Default Ratings ........................................... 15

Other Permissible Services 16

Assessments of Infonavit’s Third Party 

Collection Agencies............................................................. 16

Bond Fund Ratings ...............................................................17

Common Representative Quality Assessments.............. 18

Contract Enforceability Indicators for Mexican States.. 19

Credit Estimates..................................................................20

Equity Fund Assessments .................................................. 21

Indicative Assessment Services......................................... 21

Indicative Ratings................................................................22

Investment Manager Quality Assessments ....................22

Market Risk Ratings.............................................................23

Money Market Fund (mf) Ratings.....................................24

National Scale Stock Ratings.............................................25

Originator Assessments .....................................................25

Rating Assessment Services...............................................25

Servicer Quality Assessments............................................26

Trustee Quality Assessments............................................. 27

Other Rating Symbols 28

Expected ratings - e.............................................................28

Provisional Ratings - (P) .....................................................28

Refundeds - # ......................................................................28

Withdrawn - WR..................................................................28

Not Rated - NR....................................................................28

Not Available - NAV............................................................28

Terminated Without Rating - TWR...................................28

Inputs to Rating Services 29

Baseline Credit Assessments..............................................29

Bank Financial Strength Ratings........................................30

Loss Given Default Assessments....................................... 31

Other Definitions 32

Rating Outlooks...................................................................32

Rating Reviews.....................................................................32

Confirmation of a Rating....................................................33

Affirmation of a Rating.......................................................33

Anticipated/Subsequent Ratings Process .......................33

Rating Agency Conditions (RACs).....................................33

Covenant Quality Assessments.........................................34

Speculative Grade Liquidity Ratings.................................34

Definition of Default...........................................................34

Definition of Impairment ..................................................35

Definition of Loss-Given-Default......................................36

Credit Rating Methodologies.............................................36

Key Rating Assumptions.....................................................37

Special Comments...............................................................39

Country Ceilings for Bonds and Other Foreign 

Currency Obligations..........................................................39

Country Ceilings for Foreign Currency Bank Deposits...39

Country Ceiling for Bonds and Other Local 

Currency Obligations..........................................................39

Local Currency Deposit Ceiling..........................................40

Hybrid Security Baskets......................................................40

Timely Payment Indicator (TPI) ........................................40
2 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Preface

In the spirit of promoting transparency and clarity, Moody’s Standing Committee on Rating Symbols 

and Definitions offers this updated reference guide which defines Moody’s various ratings symbols, rating 

scales and other ratings-related definitions.

Since John Moody devised the first bond ratings almost a century ago, Moody’s rating systems have 

evolved in response to the increasing depth and breadth of the global capital markets. Much of the 

innovation in Moody’s rating system is a response to market needs for clarity around the components 

ofcredit risk or to demands for finer distinctions in rating classifications.

The Standing Committee on Rating Symbols and Definitions, one of several at Moody’s that focuses on 

credit policy issues, is comprised of structured finance, corporate finance, public finance, and financial 

institutions credit analysts, as well as representatives from the Credit Policy group. The names, direct 

telephone numbers and e-mail addresses of the members of the Standing Committee are listed below.

I invite you to contact us with your comments.

Ken Emery

Chair, Standing Committee on Rating Symbols and Definitions
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 3

Ken Emery - Chair +1.212.553.4415

Senior Vice President, Credit Policy Group

kenneth.emery@moodys.com

Richard Cantor +1.212.553.3628

Chief Credit Officer, Moody’s Investors Service

richard.cantor@moodys.com

Henry Charpentier +34.91.768.8216

Managing Director, Structured Finance Group

henry.charpentier@moodys.com

Jack Dorer +1.212.553.1332

Managing Director, US Public Finance Group

jack.dorer@moodys.com

David Fanger +1.212.553.4342

Senior Vice President, Financial Institutions Group

david.fanger@moodys.com

Joseph Grohotolski +1.212.553.4619

Vice President, Senior Compliance Officer 

joseph.grohotolski@moodys.com

Matthew Jones +1.415.274.1735

Senior Vice President, U.S. Public Finance Group

matthew.jones@moodys.com

John Kriens +1.212.553.1175

Vice President, Information Technology

John.Kriens@moodys.com

Marie Menendez +1.212.553.4126

Senior Vice President, Corporate Finance Group

marie.menendez@moodys.com

Bart Oosterveld +1.212.553.7914

Managing Director, Sovereign Risk Group 

bart.oosterveld@moodys.com

David Rosa +4420.7772.5341

Senior Vice President, Credit Policy Group 

david.rosa@moodys.com

Russell Solomon +1.212.553.4301

Senior Vice President, Corporate Finance Group

russell.solomon@moodys.com

Celina Vansetti-Hutchins +1.212.553.4845

Managing Director, Financial Institutions Group

celina.vansetti-hutchins@moodys.com

Alastair Wilson +44.207.772.1372

Chief Credit Officer, Europe

alastair.wilson@moodys.com

Moody’s Standing Committee on 

Rating Symbols and Definitions
4 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Moody’s Global Rating Scales 

Ratings assigned on Moody’s global long-term and short-term rating scales are forward-looking 

opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial 

institutions, structured finance vehicles, project finance vehicles, and public sector entities. Long-term 

ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect 

both on the likelihood of a default on contractually promised payments and the expected financial loss 

suffered in the event of default.1 Short-term ratings are assigned to obligations with an original maturity 

of thirteen months or less and reflect the likelihood of a default on contractually promised payments.2

Moody’s differentiates structured finance ratings from fundamental ratings (i.e., ratings on nonfinancial 

corporate, financial institution, and public sector entities) on the global long-term scale by adding (sf) to 

all structured finance ratings. The (sf) indicator was introduced on August 11, 2010 and explained in a 

special comment entitled, “Moody’s Structured Finance Rating Scale.” The addition of (sf) to structured 

finance ratings should eliminate any presumption that such ratings and fundamental ratings at the same 

letter grade level will behave the same. The (sf) indicator for structured finance security ratings indicates 

that otherwise similarly rated structured finance and fundamental securities may have different risk 

characteristics. Through its current methodologies, however, Moody’s aspire to achieve broad expected 

equivalence in structured finance and fundamental rating performance when measured over a long period 

of time.

1 For certain structured finance, preferred stock and hybrid securities in which payment default events are either not 

defined or do not match investors’ expectations for timely payment, the ratings reflect the likelihood of impairment 

(as defined below in this publication) and the expected financial loss in the event of impairment.

2 For certain structured finance, preferred stock and hybrid securities in which payment default events are either not 

defined or do not match investors’ expectations for timely payment, the ratings reflect the likelihood of impairment 

(as defined below in this publication).

Credit Rating Services
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 5

Global Long-Term Rating Scale

Aaa Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

Baa Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as 

such may possess certain speculative characteristics.

Ba Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

B Obligations rated B are considered speculative and are subject to high credit risk.

Caa Obligations rated Caa are judged to be speculative of poor standing and are subject to very high 

credit risk.

Ca Obligations rated Ca are highly speculative and are likely in, or very near, default, with some 

prospect of recovery of principal and interest.

C Obligations rated C are the lowest rated and are typically in default, with little prospect for 

recovery of principal or interest.

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The 

modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a 

mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, 

a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and 

securities firms.*

* By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can 

potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable 

write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating 

assigned to a hybrid security is an expression of the relative credit risk associated with that security.
6 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Global Short-Term Rating Scale

P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term 

debt obligations.

P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term 

debt obligations.

P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay 

short-term obligations.

NP Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime 

rating categories.

Linkage Between the Global Long-Term and Short-Term Rating Scales

The following table indicates the long-term ratings consistent with different short-term ratings when such 

long-term ratings exist.3

LONG-TERM 

RATING

SHORT-TERM 

RATING

Aaa

Aa1

Aa2

Aa3

A1

A2

A3

Baa1

Baa2

Baa3

Ba1, Ba2, Ba3

B1, B2, B3

Caa1, Caa2, Caa3

Ca, C

Prime-1

Prime-2

Prime-3

Not Prime

3 Structured finance short-term ratings are usually based either on the short-term rating of a support provider or on an 

assessment of cash flows available to retire the financial obligation.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 7

Obligations and Issuers Rated on the Global Long-Term and Short-Term Rating Scales 

LONG-TERM AND SHORT-TERM OBLIGATION RATINGS

Moody’s assigns ratings to long-term and short-term financial obligations. Long-term ratings are 

assigned to issuers or obligations with an original maturity of one year or more and reflect both on the 

likelihood of a default on contractually promised payments and the expected financial loss suffered in 

the event of default. Short-term ratings are assigned to obligations with an original maturity of thirteen 

months or less and reflect the likelihood of a default on contractually promised payments. 

BANK DEPOSIT RATINGS

Bank Deposit Ratings are opinions of a bank’s ability to repay punctually its foreign and/or domestic 

currency deposit obligations and, in the case of long-term deposit ratings, also reflect the expected 

financial loss of the default. Bank Deposit Ratings do not apply to deposits that are subject to a public 

or private insurance scheme; rather, the ratings apply to uninsured deposits, but they may in some cases 

incorporate the possibility that official support might in certain cases extend to uninsured as well as 

insured deposits. Foreign currency deposit ratings are subject to Moody’s country ceilings for foreign 

currency deposits. This may result in the assignment of a different (and typically lower) rating for the 

foreign currency deposits relative to the bank’s rating for domestic currency deposits.

CORPORATE FAMILY RATINGS

Moody’s Corporate Family Ratings (CFRs) are long-term ratings that reflect the likelihood of a default 

on a corporate family’s contractually promised payments and the expected financial loss suffered in the 

event of default. A CFR is assigned to a corporate family as if it had and a single class of debt and a 

single consolidated legal entity structure. CFRs are generally employed for speculative grade obligors, 

but may also be assigned to in-vestment grade obligors. The CFR normally applies to all affiliates under 

the management control of the entity to which it is assigned. For financial institutions or other complex 

entities, CFRs may also be assigned to an association or group where the group may not exercise full 

management control, but where strong intra-group support and cohesion among individual group 

members may warrant a rating for the group or association. A CFR does not reference an obligation or 

class of debt and thus does not reflect priority of claim.

COUNTERPARTY RATINGS

Counterparty Ratings are assigned to structured financial operating companies and are founded upon an 

assessment of their ability and willingness to honor their obligations under financial contracts. 

COUNTERPARTY INSTRUMENT RATINGS 

Counterparty Instrument Ratings are assigned to a financial contract and measure the risk posed to a 

counterparty arising from a special purpose vehicle’s (SPV’s) default with respect to its obligations under 

the referenced financial contract.

CREDIT DEFAULT SWAPS RATINGS

Credit Default Swaps Ratings measure the risk associated with the obligations that a credit protection 

provider has with respect to credit events under the terms of the transaction. The ratings do not address 

potential losses resulting from an early termination of the transaction, nor any market risk associated 

with the transaction.
8 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

ENHANCED RATINGS 

Enhanced Ratings only pertain to US municipal securities. An enhanced rating is Moody’s published 

assessment of a particular obligation’s credit quality absent any insurance or wrap from a financial 

guarantor, but reflecting the underlying issue’s standalone credit quality as well as any credit support 

provided by a state credit enhancement program. 

INSURANCE FINANCIAL STRENGTH RATINGS

Insurance Financial Strength Ratings are opinions of the ability of insurance companies to pay punctually 

senior policyholder claims and obligations and also reflect the expected financial loss suffered in the 

event of default . Specific obligations are considered unrated unless they are individually rated because 

the standing of a particular insurance obligation would depend on an assessment of its relative standing 

under those laws governing both the obligation and the insurance company.

INSURED RATINGS 

An insured or wrapped rating is Moody’s assessment of a particular obligation’s credit quality given the 

credit enhancement provided by a financial guarantor. Moody’s insured ratings apply a credit substitution 

methodology, whereby the debt rating matches the higher of (i) the guarantor’s financial strength rating 

and (ii) any published underlying or enhanced rating on the security.

ISSUER RATINGS

Issuer Ratings are opinions of the ability of entities to honor senior unsecured financial counterparty 

obligations and contracts. As such, Issuer Ratings incorporate any external support that is expected to 

apply to all current and future issuance of senior unsecured financial obligations and contracts, such as 

explicit support stemming from a guarantee of all senior unsecured financial obligations and contracts, 

and/or implicit support for issuers subject to joint default analysis (e.g. banks and government-related 

issuers). Issuer Ratings do not incorporate support arrangements, such as guarantees, that apply only to 

specific (but not to all) senior unsecured financial obligations and contracts.

MEDIUM-TERM NOTE PROGRAM RATINGS

Moody’s assigns provisional ratings to medium-term note (MTN) programs and definitive ratings to the 

individual debt securities issued from them (referred to as drawdowns or notes).

MTN program ratings are intended to reflect the ratings likely to be assigned to drawdowns issued from 

the program with the specified priority of claim (e.g. senior or subordinated). To capture the contingent 

nature of a program rating, Moody’s assigns provisional ratings to MTN programs. A provisional rating is 

denoted by a (P) in front of the rating and is defined elsewhere in this document.

The rating assigned to a drawdown from a rated MTN or bank/deposit note program is definitive in 

nature, and may differ from the program rating if the drawdown is exposed to additional credit risks 

besides the issuer’s default, such as links to the defaults of other issuers, or has other structural features 

that warrant a different rating. In some circumstances, no rating may be assigned to a drawdown. 

Moody’s encourages market participants to contact Moody’s Ratings Desks or visit www.moodys.com

directly if they have questions regarding ratings for specific notes issued under a medium-term note 

program. Unrated notes issued under an MTN program may be assigned an NR (not rated) symbol.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 9

STRUCTURED FINANCE INTEREST ONLY SECURITY (IO) RATINGS

A structured finance IO is a stream of cash flows that is a fraction of the interest flows from one or 

multiple referenced securities or assets in a structured finance transaction. IO ratings address the 

likelihood and degree to which payments made to the IO noteholders will be impacted by credit losses to 

the security, securities or assets referenced by the IO. Such IO securities do not have a principal balance. 

Other non-credit risks, such as a prepayment of the referenced securities or assets, are not addressed by 

the rating, although they may impact payments made to the noteholders.

UNDERLYING RATINGS

An underlying rating is Moody’s assessment of a particular obligation’s credit quality absent any insurance 

or wrap from a financial guarantor or other credit enhancement. 

For US municipal securities, the underlying rating will reflect the underlying issue’s standalone credit 

quality absent any credit support provided by a state credit enhancement program. 

US BANK OTHER SENIOR OBLIGATION RATINGS

Ratings on US Banks’ Other Senior Obligations (OSOs) are opinions of a US bank’s ability to repay 

punctually its foreign deposits and International Banking Facility deposits, as well as other senior 

non-depository obligations, including bank notes, letter-of-credit supported obligations, federal funds 

and financial contracts. US law provides that foreign deposits and senior unsecured obligations, including 

bank notes, will rank behind domestic deposit obligations of US banks in the event of liquidation. A 

rating distinction between domestic deposits and OSOs will be reflected in those cases where there is a 

material susceptibility for impairment at a future time. 
10 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

US Municipal Short-Term Debt and Demand Obligation Ratings

SHORT-TERM OBLIGATION RATINGS

While the global short-term ‘prime’ rating scale is applied to US municipal tax-exempt commercial paper, 

these programs are typically backed by external letters of credit or liquidity facilities and their short-term 

prime ratings usually map to the long-term rating of the enhancing bank or financial institution and 

not to the municipality’s rating. Other short-term municipal obligations, which generally have different 

funding sources for repayment, are rated using two additional short-term rating scales (i.e., the MIG and 

VMIG scales discussed below).

The Municipal Investment Grade (MIG) scale is used to rate US municipal bond anticipation notes of 

up to three years maturity. Municipal notes rated on the MIG scale may be secured by either pledged 

revenues or proceeds of a take-out financing received prior to note maturity. MIG ratings expire at the 

maturity of the obligation, and the issuer’s long-term rating is only one consideration in assigning the 

MIG rating. MIG ratings are divided into three levels—MIG 1 through MIG 3—while speculative grade 

short-term obligations are designated SG.

MIG 1 This designation denotes superior credit quality. Excellent protection is afforded by 

established cash flows, highly reliable liquidity support, or demonstrated broad-based access 

to the market for refinancing.

MIG 2 This designation denotes strong credit quality. Margins of protection are ample, although not 

as large as in the preceding group.

MIG 3 This designation denotes acceptable credit quality. Liquidity and cash-flow protection may 

be narrow, and market access for refinancing is likely to be less well-established.

SG This designation denotes speculative-grade credit quality. Debt instruments in this category 

may lack sufficient margins of protection.

DEMAND OBLIGATION RATINGS

In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned: a long or 

short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation 

of risk associated with scheduled principal and interest payments. The second element represents Moody’s 

evaluation of risk associated with the ability to receive purchase price upon demand (“demand feature”). 

The second element uses a rating from a variation of the MIG scale called the Variable Municipal 

Investment Grade (VMIG) scale. The rating transitions on the VMIG scale, as shown in the diagram 

below, differ from those on the Prime scale to reflect the risk that external liquidity support generally will 

terminate if the issuer’s long-term rating drops below investment grade.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 11

VMIG 1 This designation denotes superior credit quality. Excellent protection is afforded by the 

superior short-term credit strength of the liquidity provider and structural and legal 

protections that ensure the timely payment of purchase price upon demand.

VMIG 2 This designation denotes strong credit quality. Good protection is afforded by the strong 

short-term credit strength of the liquidity provider and structural and legal protections that 

ensure the timely payment of purchase price upon demand.

VMIG 3 This designation denotes acceptable credit quality. Adequate protection is afforded by the 

satisfactory short-term credit strength of the liquidity provider and structural and legal 

protections that ensure the timely payment of purchase price upon demand.

SG This designation denotes speculative-grade credit quality. Demand features rated in this 

category may be supported by a liquidity provider that does not have an investment grade 

short-term rating or may lack the structural and/or legal protections necessary to ensure the 

timely payment of purchase price upon demand.

US MUNICIPAL SHORT- TERM VS. LONG-TERM RATINGS

SHORT-TERM 

DEMAND 

OBLIGATION

MIG 1

MIG 2 A3

MIG 3

VMIG 1

VMIG 2*

VMIG 3*

SG

SG

Aaa

Aa1

Aa2

Aa3

A1

A2

Baa1

Baa2

Baa3

Ba1, Ba2, Ba3

B1, B2, B3

Caa1, Caa2, Caa3

Ca, C

LONG-TERM 

RATING

* For SBPA-backed VRDBs, The rating transitions are higher to allow for distance to downgrade to

 below investment grade due to the presence of automatic termination events in the SBPAs.
12 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

National Scale Long-Term Ratings

Moody’s long-term National Scale Ratings (NSRs) are opinions of the relative creditworthiness of issuers 

and financial obligations within a particular country. NSRs are not designed to be compared among 

countries; rather, they address relative credit risk within a given country. Moody’s assigns national scale 

ratings in certain local capital markets in which investors have found the global rating scale provides 

inadequate differentiation among credits or is inconsistent with a rating scale already in common use in 

the country. 

In each specific country, the last two characters of the rating indicate the country in which the issuer is 

located (e.g., Aaa.br for Brazil).

Aaa.n Issuers or issues rated Aaa.n demonstrate the strongest creditworthiness relative to other 

domestic issuers.

Aa.n Issuers or issues rated Aa.n demonstrate very strong creditworthiness relative to other 

domestic issuers.

A.n Issuers or issues rated A.n present above-average creditworthiness relative to other domestic 

issuers.

Baa.n Issuers or issues rated Baa.n represent average creditworthiness relative to other domestic 

issuers.

Ba.n Issuers or issues rated Ba.n demonstrate below-average creditworthiness relative to other 

domestic issuers.

B.n Issuers or issues rated B.n demonstrate weak creditworthiness relative to other domestic 

issuers.

Caa.n Issuers or issues rated Caa.n demonstrate very weak creditworthiness relative to other 

domestic issuers.

Ca.n Issuers or issues rated Ca.n demonstrate extremely weak creditworthiness relative to other 

domestic issuers.

C.n Issuers or issues rated C.n demonstrate the weakest creditworthiness relative to other 

domestic issuers.

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The 

modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a 

mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. National scale 

long-term ratings of D.ar and E.ar may also be applied to Argentine obligations. 
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 13

National Scale Short-Term Ratings

Moody’s short-term NSRs are opinions of the ability of issuers in a given country, relative to other 

domestic issuers, to repay debt obligations that have an original maturity not exceeding one year. Shortterm NSRs in one country should not be compared with short-term NSRs in another country, or with 

Moody’s global ratings.

There are four categories of short-term national scale ratings, generically denoted N-1 through N-4 as 

defined below.

In each specific country, the first two letters indicate the country in which the issuer is located (e.g., BR-1 

through BR-4 for Brazil).

N-1 Issuers rated N-1 have the strongest ability to repay short-term senior unsecured debt 

obligations relative to other domestic issuers.

N-2 Issuers rated N-2 have an above average ability to repay short-term senior unsecured debt 

obligations relative to other domestic issuers.

N-3 Issuers rated N-3 have an average ability to repay short-term senior unsecured debt 

obligations relative to other domestic issuers.

N-4 Issuers rated N-4 have a below average ability to repay short-term senior unsecured debt 

obligations relative to other domestic issuers.

Note: The short-term rating symbols P-1.za, P-2.za, P-3.za and NP.za are used in South Africa. National scale short-term 

ratings of AR-5 and AR-6 may also be applied to Argentine obligations.
14 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Moody’s currently maintains long-term and short-term NSRs for the following countries:

» Argentina (.ar)

» Bolivia (.bo)

» Brazil (.br)

» Colombia (.co)

» Czech Republic (.cz)

» Kazakhstan (.kz)

» Lebanon (.lb)

» Mexico (.mx)

» Russia (.ru)

» Slovakia (.sk)

» South Africa (.za)

» Tunisia (.tn)

» Turkey (.tr)

» Ukraine (.ua)

» Uruguay (.uy)
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 15

Probability of Default Ratings

A probability of default rating (PDR) is a corporate family-level opinion of the relative likelihood that 

any entity within a corporate family will default on one or more of its long-term debt obligations. For 

families in default on all of their long-term debt obligations (such as might be the case in bankruptcy), 

a PDR of D-PD is assigned. For families in default on a limited set of their debt obligations, the PDR is 

appended by the indicator “/LD”, for example, Caa1-PD/LD.

A D-PD probability of default rating is not assigned (or /LD symbol appended) until a failure to pay 

interest or principal extends beyond any grace period specified by the terms of the debt obligation. 

A D-PD probability of default rating is not assigned (or /LD indicator appended) for distressed 

exchanges until they have been completed, as opposed to simply announced.

Adding or removing the “/LD” indicator to an existing PDR is not a credit rating action.

Aaa-PD Corporate families rated Aaa-PD are judged to be of the highest quality, subject to the lowest 

level of default risk. 

Aa-PD Corporate families rated Aa-PD are judged to be of high quality and are subject to very low 

default risk.

A-PD Corporate families rated A-PD are judged to be upper-medium grade and are subject to low 

default risk.

Baa-PD Corporate families rated Baa-PD are judged to be medium-grade and subject to moderate 

default risk and as such may possess certain speculative characteristics.

Ba-PD Corporate families rated Ba-PD are judged to be speculative and are subject to substantial 

default risk.

B-PD Corporate families rated B-PD are considered speculative and are subject to high default risk.

Caa-PD Corporate families rated Caa-PD are judged to be speculative of poor standing, subject to very 

high default risk, and may be in default on some but not all of their long-term debt obligations.

Ca-PD Corporate families rated Ca-PD are highly speculative and are likely in, or very near, default on 

some but not all of their long-term debt obligations.

C-PD Corporate families rated C-PD are the lowest rated and are typically in default on some but 

not all of their long-term debt obligations.

D-PD Corporate families rated D are in default on all of their long-term debt obligations.

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa-PD through Caa-PD 

(e.g., Aa1-PD). The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the 

modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic 

rating category.
16 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Other Permissible Services

Assessments of Infonavit’s Third Party Collection Agencies

Moody’s Assessments of Infonavit’s Third Party Collection Agencies are opinions regarding these agencies’ 

ability to collect on Infonavit’s mortgage loans. The assessments are provided to independent collection 

agencies that are contracted by Infonavit to collect on mortgage loans when the loan cannot be serviced 

via payroll deduction. They are assigned to agencies that service low delinquency pools or/and high 

delinquency pools. The assessment to these Infonavit service providers applies only in the context of 

Infonavit’s primary servicing operations. As a result, these assessments are not stand-alone servicer/vendor 

quality ratings and do not refer to the ability of these third party collection agencies to service other types 

of loans.

Moody’s maintains Assessments of Infonavit’s Third Party Collection Agencies only in Mexico.

The Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit) is the Mexican federal 

institute for workers housing, which originates and securitizes mortgage loans. While initially Infonavit 

loans are repaid via payroll deduction, once the borrower ceases to work for a company in the private 

sector the loan is serviced by Infonavit using a network of independent collection agencies.

» Strong

» Above Average

» Average

» Below Average

» Weak

Note: Where appropriate, a “+” or “-” modifier will be appended to the “Above Average”, “Average”, and “Below Average” 

category and a “-” modifier will be appended to the “Strong” category. A “+” modifier indicates the agency ranks in 

the higher end of the designated category. A “-” modifier indicates the agency ranks in the lower end of the 

designated category.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 17

Bond Fund Ratings

Bond Fund Ratings are opinions of the credit quality of investments within mutual funds and similar investment vehicles which principally invest in medium- and long-term fixed income obligations. As such, 

these ratings primarily reflect Moody’s assessment of the creditworthiness of the assets held by the fund. 

Other risks, such as liquidity, operational, interest rate, currency and any other market risk, are excluded 

from the rating. In addition, as the ratings are intended to represent opinions on a fund’s underlying 

assets, they specifically do not consider the historic, current, or prospective performance of a fund with 

respect to appreciation, volatility of net asset value, or yield.

Aaa-bf Bond Funds rated Aaa-bf generally hold assets judged to be of the highest credit quality.

Aa-bf Bond Funds rated Aa-bf generally hold assets judged to be of high credit quality.

A-bf Bond Funds rated A-bf generally hold assets considered upper-medium credit quality.

Baa-bf Bond Funds rated Baa-bf generally hold assets considered medium credit quality.

Ba-bf Bond Funds rated Ba-bf generally hold assets judged to have speculative elements.

B-bf Bond Funds rated B-bf generally hold assets considered to be speculative.

Caa-bf Bond Funds rated Caa-bf generally hold assets judged to be of poor standing.

Ca-bf Bond Funds rated Ca-bf generally hold assets that are highly speculative and that are likely 

in, or very near, default, with some prospect of recovery of principal and interest.

C-bf Bond Funds rated C-bf generally hold assets that are in default, with little prospect for 

recovery of principal or interest.
18 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Common Representative Quality Assessments

Moody’s Common Representative Quality (CRQ) Assessments are opinions regarding an organization’s 

ability to represent the interests of investors, relative to other common representatives within a given 

country. The assessments represent Moody’s assessment of a common representative’s organizational 

structure and other management characteristics, including its human resources allocation, information 

technology, and operational controls and procedures.

The assessment definitions are as follows, with an “nn” modifier signifying the relevant country (e.g. 

CRQ1.mx for Mexico). Moody’s currently maintains common representative assessments for Mexico.

CRQ1.nn Strong ability to represent interests of the trust certificate holders.

CRQ2.nn Above-average ability to represent interests of the trust certificate holders. 

Common representative is judged to have “good” financial and operational stability.

CRQ3.nn Average ability to represent interests of the trust certificate holders. Common representative 

is judged to have average financial and operational stability.

CRQ4.nn Below-average ability to represent interests of the trust certificate holders, and below average 

financial and operational stability.

CRQ5.nn Weak ability to represent interests of the trust certificate holders, and weak financial and 

operational stability.

Note: Where appropriate, a “+” or “-” modifier will be appended to the CRQ2, CRQ3, and CRQ4 assessment category 

and a “-” modifier will be appended to the CRQ1 rating category (e.g. CRQ1-.nn). A “+” modifier indicates the common 

representative ranks in the higher end of the designated assessment category. A “-” modifier indicates the common 

representative ranks in the lower end of the designated assessment category.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 19

Contract Enforceability Indicators for Mexican States

Contract enforceability indicators are opinions of the relative effectiveness of Mexican states in enforcing 

disputed commercial contracts and mortgages. The indicators provide an ordinal ranking and do not address 

the absolute effectiveness of state judicial systems. Contract enforceability indicators are assigned to individual 

states based on a standardized weighting of results generated by independent, questionnaire-based, studies 

conducted by the Instituto Tecnológico Autonomy de México (ITAM), a Mexican university, and Gaxiola 

Calvo Sobrino y Asociados (GCSA), a Mexican law firm. As the indicators are derived primarily from public 

opinion polls, which may vary due to changes in participants and/or perceptions, they are not directly 

comparable from one study to another. Accordingly, the indicators are point-in-time assessments and are not 

monitored between studies.

EC1 Highest effectiveness in handling commercial cases and enforcing resolutions in Mexico.

EC2 Above average effectiveness in handling commercial cases and enforcing resolutions in 

Mexico.

EC3 Average effectiveness in handling commercial cases and enforcing resolutions in Mexico.

EC4 Below average effectiveness in handling commercial cases and enforcing resolutions in 

Mexico.

EC5 Weakest effectiveness in handling commercial cases and enforcing resolutions in Mexico.
20 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Credit Estimates

A Credit Estimate (CE) is an unpublished point-in-time opinion of the approximate credit quality of individual 

securities, financial contracts, issuers, corporate families or loans. A CE is not equivalent to and does not 

represent a traditional Moody’s Credit Rating as defined in Moody’s Code of Professional Conduct and is not 

assigned by a rating committee. Had Moody’s conducted an analysis commensurate with a full Moody’s Credit 

Rating, the result may have been significantly different. CEs are not monitored but, in certain circumstances, 

may be updated from time to time.

CEs are widely used in the process of assessing elements of credit risk in transactions for which a traditional 

Moody’s credit rating is to be determined. CEs are provided in the context of granular pools (where no one 

obligor represents an exposure of more than 3% of the total pool), chunky pools (where individual exposures 

represent 3% or more of the total pool) or single-name exposures. The following are examples of analysis where 

CEs are used to assess the credit risk:

» unrated loans or debt instruments included in the collateral backing CDOs or CMBS;

» credit exposures of financial guarantors;

» collateral included in pools of covered bonds; and

» collateral included in pools of covered loans; and

» parties to a transaction that may be expected to provide credit or operational support under certain 

conditions, such as with government-related institutions and project finance transactions.

CEs are typically assigned using a “desktop analysis” based on (limited) public information or 

information on a debt issuer supplied by various third parties (i.e., the CDO manager, covered bond 

or project finance sponsor or the guarantor or CMBS depositor) and usually do not involve any 

participation from the underlying obligor. 

CEs are not expressed through the use of Moody’s traditional 21-point, Aaa-C alphanumeric long-term 

rating scale; rather, they are on expressed on a simple numerical 1-21 scale (except for CMBS CEs). They 

are calibrated, however, to be broadly comparable to Moody’s alphanumeric rating scale and Moody’s 

Rating Factors, which are used in CDO analysis.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 21

Equity Fund Assessments 

Moody’s equity fund assessments are opinions of the relative investment quality of investment funds, 

which principally invest in common stock or in a combination of common stock and fixed-income 

securities. Investment quality is judged based on the fund’s historical performance relative to funds 

employing a similar investment strategy, as well as on the quality of the fund manager.

The assessments are not opinions on prospective performance of a fund with respect to asset appreciation, 

volatility of net asset value or yield. 

EF-1 Equity funds assessed at EF-1 have the highest investment quality relative to funds with a 

similar investment strategy 

EF-2 Equity funds assessed at EF-2 have high investment quality relative to funds with a similar 

investment strategy

EF-3 Equity funds assessed at EF-3 have moderate investment quality relative to funds with a 

similar investment strategy

EF-4 Equity funds assessed at EF-4 have low investment quality relative to funds with a similar 

investment strategy

EF-5 Equity funds assessed at EF-5 have the lowest investment quality relative to funds with a 

similar investment strategy

Indicative Assessment Services

An Indicative Assessment or IAS is a confidential, unpublished, unmonitored, point-in-time opinion 

of the potential Credit Rating(s) of, and based solely on, one or more hypothetical Scenario(s) (defined 

below) communicated to MIS in writing by an applicant in relation to an entity/issuer that does not 

currently have a public Credit Rating from MIS. Indicative Assessments are not equivalent to and do 

not represent traditional MIS Credit Ratings. However, Indicative Assessments are expressed on MIS’s 

traditional rating scale.

SCENARIO

A Scenario is:

(a) a proposed credit transforming transaction, project and/or debt issuance which materially alters 

the issuer’s current state (including acquisitions, disposals, share buybacks, listings, initial public 

offerings and material restructurings), or a materially different variation on such a transaction, 

project and/or debt issuance, including a material change in the overall size of the debt being 

contemplated; or

(b) a materially different variation on the proposed debt issuance that has previously been the subject 

of an Indicative Rating, including a material change in the overall size of debt being contemplated. 
22 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Indicative Ratings

An Indicative Rating is a confidential, unpublished, unmonitored, point-in-time opinion of the potential 

Credit Rating(s) of an issuer or a proposed debt issuance by an issuer contemplating such a debt issuance 

at some future date. Indicative Ratings are not equivalent to and do not represent traditional MIS Credit 

Ratings. However, Indicative Ratings are expressed on MIS’s traditional rating scale.

Investment Manager Quality Assessments 

Moody’s Investment Manager Quality assessments represent an analysis of the manner in which an 

investment manager creates, manages and monitors its investment offerings and serves its clientele. 

Investment managers are defined as entities whose principal activities involve the management of retail, 

high net worth and/or institutional assets. 

The assessments incorporate Moody’s analysis of the manager’s investment activities and other 

management characteristics, including, as applicable, the performance of its product offerings, its 

financial profile and client servicing performance. 

Moody’s Investment Manager Quality assessments do not indicate a company’s ability to repay a fixed 

financial obligation, or satisfy contractual financial obligations either in its own right or any that may 

have been entered into through actively managed portfolios. 

Also, the assessments are not intended to consider the prospective performance of a portfolio, mutual 

fund or other investment vehicle with respect to appreciation, volatility of net asset value, or yield. 

Investment Manager Quality assessment definitions are as follows:

MQ1 Investment managers assessed at MQ1 are judged to exhibit excellent management 

characteristics.

MQ2 Investment managers assessed at MQ2 are judged to exhibit very good management 

characteristics.

MQ3 Investment managers assessed at MQ3 are judged to exhibit good management 

characteristics.

MQ4 Investment managers assessed at MQ4 are judged to exhibit adequate management 

characteristics.

MQ5 Investment managers assessed at MQ5 are judged to exhibit poor management 

characteristics.

Note: Where appropriate, a “+” or “-” modifier will be appended to the MQ2, MQ3, and MQ4 assessment category and 

a “-” modifier will be appended to the MQ1 assessment category. A “+” modifier indicates the fund ranks in the higher 

end of the designated assessment category. A “-” modifier indicates the fund ranks in the lower end of the designated 

assessment category
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 23

Market Risk Ratings

Moody’s Bond Fund Market Risk (MR) ratings are opinions of the relative degree of volatility of a 

rated fund’s net asset value (NAV). In forming an opinion on the fund’s future price volatility, Moody’s 

analysts consider risk elements that may have an effect on a fund’s net asset value, such as interest rate 

risk, prepayment and extension risk, liquidity and concentration risks, currency risk, and derivatives 

risk. The ratings are not intended to reflect the prospective performance of a fund with respect to price 

appreciation or yield.

MR1 Bond Funds rated MR1 are judged to have very low sensitivity to changing interest rates and 

other market conditions.

MR2 Bond Funds rated MR2 are judged to have low sensitivity to changing interest rates and other 

market conditions.

MR3 Bond Funds rated MR3 are judged to have moderate sensitivity to changing interest rates 

and other market conditions.

MR4 Bond Funds rated MR4 are judged to have high sensitivity to changing interest rates and 

other market conditions.

MR5 Bond Funds rated MR5 are judged to have very high sensitivity to changing interest rates and 

other market conditions.

Note: Market Risk (MR) ratings are assigned only in Mexico.
24 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Money Market Fund (mf) Ratings

Moody’s Money Market Fund Ratings are opinions of the investment quality of shares in mutual funds 

and similar investment vehicles which principally invest in short-term fixed income obligations. As such, 

these ratings incorporate Moody’s assessment of a fund’s published investment objectives and policies, 

the creditworthiness of the assets held by the fund, the liquidity profile of the fund’s assets relative to the 

fund’s investor base, the assets’ susceptibility to market risk, as well as the management characteristics of 

the fund. The ratings are not intended to consider the prospective performance of a fund with respect to 

appreciation, volatility of net asset value, or yield.

Aaa-mf Money market funds rated Aaa-mf have very strong ability to meet the dual objectives of 

providing liquidity and preserving capital.

Aa-mf Money market funds rated Aa-mf have strong ability to meet the dual objectives of providing 

liquidity and preserving capital.

A-mf Money market funds rated A-mf have moderate ability to meet the dual objectives of 

providing liquidity and preserving capital.

Baa-mf Money market funds rated Baa-mf have marginal ability to meet the dual objectives of 

providing liquidity and preserving capital.

B-mf Money market funds rated B-mf are unable to meet the objective of providing liquidity and 

have marginal ability to meet the objective of preserving capital.

C-mf Money market funds rated C-mf are unable to meet either objective of providing liquidity or 

preserving capital.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 25

National Scale Stock Ratings

National Scale Stock (“NSSR”) ratings provide an ordinal ranking of a company’s ability to pay and 

sustain common stock dividend payments while also providing an assessment of the stock’s trading 

liquidity in its principal market. Moody’s currently issues NSSRs for stocks traded on the Argentinean, 

Bolivian, Colombian, and Uruguayan stock markets. NSSRs are expressed on a 1 through 4 rating scale.

1 Issuers that exhibit a very strong combination of liquidity and dividend sustainability.

2 Issuers that exhibit a strong combination of liquidity and dividend sustainability.

3 Issuers that exhibit a fair combination of liquidity and dividend sustainability.

4 Issuers that exhibit a poor combination of liquidity and dividend sustainability.

Originator Assessments 

Moody’s Originator Assessments (OAs) are Moody’s opinions of the strength of originators’ policies and 

practices as they affect defaults and losses in structured finance securities backed by loans. OAs consider 

early loan performance, originator ability and originator stability. Originator assessments look to isolate 

the effects an originator’s policies and practices have on loan performance from the effects of external 

factors such as the macroeconomic environment and the ability of the servicer. 

Moody’s assigns originators one of the following six assessment levels: Strong, Above Average, Average, 

Below Average, Weak, Unacceptable.

Rating Assessment Services

The Rating Assessment Service or RAS is a confidential, unpublished, unmonitored, point-in-time opinion 

of the potential impact on the Credit Rating(s) of one or more hypothetical Scenario(s) (defined below) 

communicated to MIS in writing by a Rated Entity. Rating Assessments are not equivalent to and do not 

represent traditional MIS Credit Ratings. However, Rating Assessments are expressed on MIS’s traditional 

rating scale.
26 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Servicer Quality Assessments

Moody’s Servicer Quality (SQ) assessments are opinions of the ability of a servicer to prevent or mitigate 

losses in a securitization. SQ assessments are provided for servicers who act as the Primary Servicer 

(servicing the assets from beginning to end), Special Servicer (servicing only the more delinquent assets), 

or Master Servicer (overseeing the performance and reporting from underlying servicers). For Primary 

Servicers, each SQ assessment is assigned to a specific asset type.

SQ assessments represent Moody’s assessment of a servicer’s ability to affect losses based on factors 

under the servicer’s control. The SQ approach works by separating a servicer’s performance from the 

credit quality of the assets being serviced. In doing this, Moody’s evaluates how effective a servicer is at 

preventing defaults and maximizing recoveries to a transaction when defaults occur.

SQ assessments consider the operational and financial stability of a servicer as well as its ability to 

respond to changing market conditions. This assessment is based on the company’s organizational 

structure, management characteristics, financial profile, operational controls and procedures as well as its 

strategic goals.

Moody’s SQ assessments are different from traditional debt ratings, which are opinions as to the credit 

quality of a specific instrument. SQ assessments do not apply to a company’s ability to repay a fixed 

financial obligation or satisfy contractual financial obligations other than, in limited circumstances, the 

obligation to advance on delinquent assets it services, when such amounts are believed to be recoverable.

SQ1 Strong combined servicing ability and servicing stability

SQ2 Above average combined servicing ability and servicing stability

SQ3 Average combined servicing ability and servicing stability

SQ4 Below average combined servicing ability and servicing stability

SQ5 Weak combined servicing ability and servicing stability

Note: Where appropriate, a “+” or “-” modifier will be appended to the SQ2, SQ3, and SQ4 rating category and a “-” 

modifier will be appended to the SQ1 rating category. A “+” modifier indicates the servicer ranks in the higher end of the 

designated rating category. A “-” modifier indicates the servicer ranks in the lower end of the designated rating category.

Moody’s also assigns National Scale Servicer Quality Assessments. National Scale Servicer Quality Assessments append 

a suffix of “.nn” to the ratings on the above scale in order to signify the relevant country (e.g. SQ1.ru for Russian National 

Scale Servicer Quality Assessments).
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 27

Trustee Quality Assessments

Moody’s Trustee Quality (TQ) Assessments are opinions regarding an organization’s ability to manage 

the entrusted assets for the benefit of investors, relative to other trustees within a given country. The 

assessments represent Moody’s assessment of a trustee’s organizational structure and other management 

characteristics, including its monitoring and reporting system, human resources allocation, information 

technology, operational controls and procedures, and master servicing capability.

The assessment definitions are as follows, with an “nn” modifier signifying the relevant country (e.g. 

TQ1. ar for Argentina, or TQ4.mx for Mexico). Moody’s currently maintains trustee quality assessments 

for the following countries:

» Argentina (TQ.ar)

» Brazil (TQ.br)

» Mexico (TQ.mx)

TQ1.nn Strong capability of managing entrusted assets for the benefit of the trust 

certificate holders.

TQ2.nn Above-average capability of managing entrusted assets for the benefit of the trust certificate 

holders. Trustee is judged to have “good” financial and operational stability.

TQ3.nn Average capability of managing entrusted assets for the benefit of the trust certificate 

holders. Trustee is judged to have average financial and operational stability.

TQ4.nn Below-average capability of managing entrusted assets for the benefit of the trust certificate 

holders, and below-average financial and operational stability.

TQ5.nn Weak capability of managing entrusted assets for the benefit of the trust certificate holders, 

and weak financial and operational stability.

Note: Where appropriate, a “+” or “-” modifier will be appended to the TQ2, TQ3, and TQ4 assessment category and a 

“-” modifier will be appended to the TQ1 rating cat-egory (e.g. TQ1-.nn). A “+” modifier indicates the trustee ranks in the 

higher end of the designated rating category. A “-” modifier indicates the trustee ranks in the lower end of the designated 

assessment category.
28 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Other Rating Symbols

Expected ratings - e

To address market demand for timely information on particular types of credit ratings, Moody’s has 

licensed to certain third parties the right to generate “Expected Ratings.” Expected Ratings are designated 

by an “e” after the rating code, and are intended to anticipate Moody’s forthcoming rating assignments 

based on reliable information from third party sources (such as the issuer or underwriter associated with 

the particular securities) or established Moody’s rating practices (i.e., medium term notes are typically, 

but not always, assigned the same rating as the note’s program rating). Expected Ratings will exist only 

until Moody’s confirms the Expected Rating, or issues a different rating for the relevant instrument. 

Moody’s encourages market participants to contact Moody’s Ratings Desk or visit www.moodys.com if 

they have questions regarding Expected Ratings, or wish Moody’s to confirm an Expected Rating.

Provisional Ratings - (P)

As a service to the market and at the request of an issuer, Moody’s will often assign a provisional rating 

when the assignment of a final rating is subject to the fulfillment of contingencies but it is highly likely 

that the rating will become definitive after all documents are received or an obligation is issued into the 

market. A provisional rating is denoted by placing a (P) in front of the rating. Such ratings are typically 

assigned to shelf registrations under SEC rule 415 or transaction-based structures that require investor 

education. When a transaction uses a well-established structure and the transaction’s structure and terms 

are not expected to change prior to sale in a manner that would affect the rating, a definitive rating may 

be assigned directly.

Refundeds - #

Issues that are secured by escrowed funds held in trust, reinvested in direct, non-callable US government 

obligations or non-callable obligations unconditionally guaranteed by the US Government or Resolution 

Funding Corporation are identified with a # (hatch mark) symbol, e.g., #Aaa.

Withdrawn - WR

When Moody’s no longer rates an obligation on which it previously maintained a rating, the symbol WR 

is employed. Please see Moody’s Guidelines for the Withdrawal of Ratings, available on 

www.moodys.com.

Not Rated - NR

NR is assigned to an unrated issuer, obligation and/or program.

Not Available - NAV

An issue that Moody’s has not yet rated is denoted by the NAV symbol.

Terminated Without Rating - TWR

The symbol TWR applies primarily to issues that mature or are redeemed without having been rated.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 29

Inputs to Rating Services

Baseline Credit Assessments

Baseline credit assessments (BCAs) are opinions of issuers’ standalone intrinsic strength, absent any 

extraordinary support from an affiliate4 or a government. Contractual relationships and any expected 

ongoing annual subsidies from the government or an affiliate are incorporated in BCAs and, therefore, 

are considered intrinsic to an issuer’s standalone financial strength.

BCAs are expressed on a lower-case alpha-numeric scale that corresponds to the alpha-numeric ratings of 

the global long-term rating scale.

aaa Issuers assessed aaa are judged to have the highest intrinsic, or standalone, financial strength, and thus 

subject to the lowest level of credit risk absent any possibility of extraordinary support from an affiliate 

or a government.

aa Issuers assessed aa are judged to have high intrinsic, or standalone, financial strength, and thus subject 

to very low credit risk absent any possibility of extraordinary support from an affiliate or a government.

a Issuers assessed a are judged to have upper-medium-grade intrinsic, or standalone, financial strength, 

and thus subject to low credit risk absent any possibility of extraordinary support from an affiliate or a 

government.

baa Issuers assessed baa are judged to have medium-grade intrinsic, or standalone, financial strength, 

and thus subject to moderate credit risk and, as such, may possess certain speculative credit elements 

absent any possibility of extraordinary support from an affiliate or a government.

ba Issuers assessed ba are judged to have speculative intrinsic, or standalone, financial strength, and are 

subject to substantial credit risk absent any possibility of extraordinary support from an affiliate or 

a government.

b Issuers assessed b are judged to have speculative intrinsic, or standalone, financial strength, and are 

subject to high credit risk absent any possibility of extraordinary support from an affiliate or 

a government. 

caa Issuers assessed caa are judged to have speculative intrinsic, or standalone, financial strength, and are 

subject to very high credit risk absent any possibility of extraordinary support from an affiliate or 

a government.

ca Issuers assessed ca have highly speculative intrinsic, or standalone, financial strength, and are likely to 

be either in, or very near, default, with some prospect for recovery of principal and interest; or, these 

issuers have avoided default or are expected to avoid default through the provision of extraordinary 

support from an affiliate or a government.

c Issuers assessed c are typically in default, with little prospect for recovery of principal or interest; or, 

these issuers are benefiting from a government or affiliate support but are likely to be liquidated over 

time; without support there would be little prospect for recovery of principal or interest. 

Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic assessment classification from aa through caa. The 

modifier 1 indicates that the obligation ranks in the higher end of its generic assessment category; the modifier 2 indicates a 

mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic assessment category. 

4 Affiliate includes a parent, cooperative groups and significant investors (typically with a greater than 20 percent voting 

interest). Government includes local, regional and national governments.
30 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Bank Financial Strength Ratings

Moody’s Bank Financial Strength Ratings (BFSRs) represent Moody’s opinion of a bank’s intrinsic safety 

and soundness and, as such, exclude certain external credit risks and credit support elements that are 

addressed by Moody’s Bank Deposit Ratings. In addition to commercial banks, Moody’s BFSRs may also 

be assigned to other types of financial institutions such as multilateral development banks, governmentsponsored financial institutions and national development financial institutions.

Unlike Moody’s Bank Deposit Ratings, Bank Financial Strength Ratings do not address the probability of 

timely payment. Instead, Bank Financial Strength Ratings are a measure of the likelihood that a bank will 

require assistance from third parties such as its owners, its industry group, or official institutions.

Bank Financial Strength Ratings do not take into account the probability that the bank will receive such 

external support, nor do they address risks arising from sovereign actions that may interfere with a bank’s 

ability to honor its domestic or foreign currency obligations.

Factors considered in the assignment of Bank Financial Strength Ratings include bank-specific elements 

such as financial fundamentals, franchise value, and business and asset diversification. Although Bank 

Financial Strength Ratings exclude the external factors specified above, they do take into account other 

risk factors in the bank’s operating environment, including the strength and prospective performance 

of the economy, as well as the structure and relative fragility of the financial system, and the quality of 

banking regulation and supervision.

Bank Financial Strength Ratings are expressed on an A to E scale and where appropriate a “+” or 

“-“modifier will be appended to the ratings to distinguish those banks that fall in the higher and lower 

ends, respectively, of the generic rating category. Bank Financial Strength Ratings are mapped to Baseline 

Credit Assessments, described above, which are opinions of issuers’ standalone intrinsic strength, absent 

any extraordinary support from an affiliate5 or a government.

5 Affiliate includes a parent, cooperative groups and significant investors (typically with a greater than 20 percent voting 

interest). Government includes local, regional and national governments.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 31

BFSR TO BCA MAPPING 

Bank Financial Strength Rating (BFSR) Baseline Credit Assessment (BCA)

A aaa

A- aa1

B+ aa2

B aa3

B- a1

C+ a2

C a3

C- baa1

C- baa2

D+ baa3

D+ ba1

D ba2

D- ba3

E+ b1

E+ b2

E+ b3

E caa1

E caa2

E caa3

Loss Given Default Assessments

Moody’s Loss Given Default (LGD) assessments are opinions about expected loss given default expressed as 

a percent of principal and accrued interest at the resolution of the default.6 LGD assessments are assigned to 

individual loan, bond, and preferred stock issues. The firm-wide or enterprise expected LGD rate generally 

approximates a weighted average of the expected LGD rates on the firm’s liabilities (excluding preferred 

stock), where the weights equal each obligation’s expected share of the total liabilities at default. 

The following scale is used in the assignment of LGD assessments: 

Assessments Loss range

LGD1 ≥ 0% and < 10%

LGD2 ≥ 10% and < 30%

LGD3 ≥ 30% and < 50%

LGD4 ≥ 50% and < 70%

LGD5 ≥ 70% and < 90%

LGD6 ≥ 90% and ≤ 100%

6 The expected LGD rate is 100% minus the expected value that will be received at default resolution, discounted by the 

coupon rate back to the date the last debt service payment was made, and divided by the principal outstanding at the 

date of the last debt service payment.
32 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Other Definitions 

Rating Outlooks

A Moody’s rating outlook is an opinion regarding the likely rating direction over the medium term. 

Rating outlooks fall into four categories: Positive (POS), Negative (NEG), Stable (STA), and Developing 

(DEV). Outlooks may be assigned at the issuer level or at the rating level. Where there is an outlook at 

the issuer level and the issuer has multiple ratings with differing outlooks, an “(m)” modifier to indicate 

multiple will be displayed and Moody’s written research will describe and provide the rationale for

these differences. A designation of RUR (Rating(s) Under Review) indicates that an issuer has one or 

more ratings under review, which overrides the outlook designation. A designation of RWR (Rating(s) 

Withdrawn) indicates that an issuer has no active ratings to which an outlook is applicable. Rating 

outlooks are not assigned to all rated entities. In some cases, this will be indicated by the display NOO 

(No Outlook).

A stable outlook indicates a low likelihood of a rating change over the medium term. A negative, positive 

or developing outlook indicates a higher likelihood of a rating change over the medium term. A rating 

committee that assigns an outlook of stable, negative, positive, or developing to an issuer’s rating is also 

indicating its belief that the issuer’s credit profile is consistent with the relevant rating level at that point 

in time.

The time between the assignment of a new rating outlook and a subsequent rating action has historically 

varied widely, depending upon the pace of new credit developments which materially affect the issuer’s 

credit profile. On average, after the initial assignment of a positive or negative rating outlook, the next 

rating action – either a change in outlook, a rating review, or a change in rating – has followed within 

about a year, but outlooks have also remained in place for much shorter and much longer periods of 

time. The next rating action subsequent to the assignment of a negative (positive) rating outlook has 

historically been a downgrade or review for possible downgrade (upgrade or review for possible upgrade) 

about one half of the time; rating actions in the opposite direction are less common. After the initial 

assignment of a stable outlook, about 90% of ratings experience no change in rating during the 

following year.

Rating Reviews

A review indicates that a rating is under consideration for a change in the near term. A rating can be 

placed on review for upgrade (UPG), downgrade (DNG), or more rarely with direction uncertain 

(UNC). A review may end with a rating being upgraded, downgraded, or confirmed without a change to 

the rating. Ratings on review are said to be on Moody’s “Watchlist” or “On Watch”.

Ratings are placed on review when a rating action may be warranted in the near term but further 

information or analysis is needed to reach a decision on the need for a rating change or the magnitude of 

the potential change. The time between the origination of a rating review and its conclusion varies widely 

depending upon the amount of time needed to obtain and to analyze the information relevant to make a 

ratings determination. Most rating reviews are completed within 45 to 180 days; however, some reviews 

are completed more quickly and many require considerably more time. Ratings on review for possible 

downgrade (upgrade) have historically concluded with a downgrade (upgrade) over half of the time.
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 33

Confirmation of a Rating

A Confirmation is a public statement that a previously announced review of a rating has been completed 

without a change to the rating.

Affirmation of a Rating

An Affirmation is a public statement that the current Credit Rating assigned to an issuer or debt 

obligation, which is not currently under review, continues to be appropriately positioned. An Affirmation 

is generally issued to communicate Moody’s opinion that a publicly visible credit development does not 

have a direct impact on an outstanding rating.

Anticipated/Subsequent Ratings Process 

The process of assigning Credit Ratings that are derived exclusively from an existing Credit Rating 

of a program, series, category/class of debt or primary Rated Entity. This includes: 

» An assignment of a Credit Rating to a new issuance, take-down or take-down-like debt within or 

under an existing rated program, without impact on the program’s Credit Rating (including covered 

bonds and frequent issues from a “shelf registration”); 

» Credit Ratings based on the pass-through of a primary Rated Entity’s Credit Rating, including monoline or guarantee linked ratings; 

» An assignment of Credit Ratings to securities of the same seniority as previously rated debt when existing Credit Ratings had already contemplated issuance of that debt (including Credit Ratings released 

from Federal Agency Queue issued by federal agencies or other specialty common queues). This also 

includes Credit Ratings assigned to new debts or amended and extended credit facilities which replace 

similarly structured debts or credit facilities at the same rating level; 

An assignment of a definitive Credit Rating to replace a previously assigned provisional rating (i.e., (P) 

rating) at the same rating level, or a definitive rating assigned to a security being issued from a program 

carrying a provisional rating, in each case where the transaction structure and terms have not changed 

prior to the assignment of the definitive Credit Rating in a manner that would have affected the 

Credit Rating.

Rating Agency Conditions (RACs)

Parties to a transaction sometimes choose to include clauses in the transaction documents that require a 

party thereto to obtain an opinion from a rating agency that certain specified actions, events, changes to 

the structure of, or amendments to the documentation of, the transaction will not result in a reduction 

or withdrawal of the current rating maintained by that rating agency. Such an opinion is referred to by 

Moody’s as a “RAC” and consists of a letter or other written communication, such as a press release,

from Moody’s issued after consideration of a request that Moody’s provide a RAC. The decision to issue a 

RAC remains entirely within Moody’s discretion, and Moody’s may choose not to provide a RAC even if 

the transaction documents require it. When Moody’s chooses to issue a RAC, the RAC reflects Moody’s 

opinion solely that the specified action, event, change in structure or amendment, in and of itself and as 

of that point in time, will not result in a reduction or withdrawal of Moody’s current rating on the debt. 

A RAC is not a “confirmation” or “affirmation” of the rating, as those terms are defined elsewhere in this 

Rating Symbols and Definitions publication, nor should it be interpreted as Moody’s “approval of” or 

“consent to” the RAC subject matter.
34 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

Covenant Quality Assessments

Moody’s covenant quality assessments measure the investor protections provided by key bond covenants 

within an indenture. The assessments are unmonitored, point-in-time scores, but may be updated as 

circumstances dictate. Key covenants assessed include provisions for restricted payments, change of 

control, limitations on debt incurrence, negative pledges, and merger restrictions, among others.

Speculative Grade Liquidity Ratings

Moody’s Speculative Grade Liquidity Ratings are opinions of an issuer’s relative ability to generate cash 

from internal resources and the availability of external sources of committed financing, in relation to 

its cash obligations over the coming 12 months. Speculative Grade Liquidity Ratings will consider the 

likelihood that committed sources of financing will remain available. Other forms of liquidity support 

will be evaluated and consideration will be given to the likelihood that these sources will be available 

during the coming 12 months. Speculative Grade Liquidity Ratings are assigned to speculative grade 

issuers that are by definition Not Prime issuers.

SGL-1 Issuers rated SGL-1 possess very good liquidity. They are most likely to have the capacity to 

meet their obligations over the coming 12 months through internal resources without relying 

on external sources of committed financing.

SGL-2 Issuers rated SGL-2 possess good liquidity. They are likely to meet their obligations over the 

coming 12 months through internal resources but may rely on external sources of committed 

financing. The issuer’s ability to access committed sources of financing is highly likely based 

on Moody’s evaluation of near-term covenant compliance.

SGL-3 Issuers rated SGL-3 possess adequate liquidity. They are expected to rely on external sources 

of committed financing. Based on its evaluation of near-term covenant compliance, Moody’s 

believes there is only a modest cushion, and the issuer may require covenant relief in order to 

maintain orderly access to funding lines.

SGL-4 Issuers rated SGL-4 possess weak liquidity. They rely on external sources of financing and the 

availability of that financing is, in Moody’s opinion, highly uncertain.

Definition of Default

Moody’s definition of default is applicable only to debt or debt-like obligations (e.g., swap agreements). 

Four events constitute a debt default under Moody’s definition:

a) a missed or delayed disbursement of a contractually-obligated interest or principal payment (excluding 

missed payments cured within a contractually allowed grace period), as defined in credit agreements 

and indentures;

b) a bankruptcy filing or legal receivership by the debt issuer or obligor that will likely cause a miss or 

delay in future contractually-obligated debt service payments;

c) a distressed exchange whereby 1) an obligor offers creditors a new or restructured debt, or a new 

package of securities, cash or assets that amount to a diminished financial obligation relative to the 

original obligation and 2) the exchange has the effect of allowing the obligor to avoid a bankruptcy or 

payment default in the future; or
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 35

d) a change in the payment terms of a credit agreement or indenture imposed by the sovereign that 

results in a diminished financial obligation, such as a forced currency re-denomination (imposed by 

the debtor, himself, or his sovereign) or a forced change in some other aspect of the original promise, 

such as indexation or maturity.7

Moody’s definition of default does not include so-called “technical defaults,” such as maximum leverage 

or minimum debt coverage violations, unless the obligor fails to cure the violation and fails to honor the 

resulting debt acceleration which may be required. Also excluded are payments owed on long-term debt 

obligations which are missed due to purely technical or administrative errors which are 1) not related

to the ability or willingness to make the payments and 2) are cured in very short order (typically, 1-2 

business days). Finally, in select instances based on the facts and circumstances, missed payments on 

financial contracts or claims may be excluded if they are the result of legal disputes regarding the validity 

of those claims.

Definition of Impairment 

A security is impaired when investors receive — or expect to receive with near certainty — less value than 

would be expected if the obligor were not experiencing financial distress or otherwise prevented from 

making payments by a third party, even if the indenture or contractual agreement does not provide the 

investor with a natural remedy for such events, such as the right to press for bankruptcy. 

Moody’s definition of impairment is applicable to debt, preferred stock, and other hybrid securities. A 

security is deemed to be impaired if:

a) all events that meet the definition of default (above);

b) contractually-allowable payment omissions of scheduled dividends, interest or principal payments on 

debt, preferred stock or other hybrid instruments8 or contractually allowable interruptions of interest 

payments to similar structured finance instruments9;

c) downgrades to Ca or C, signaling the near certain expectation of a significant level of future losses;

d) write-downs or “impairment distressed exchanges”10 on debt, preferred stock or other hybrid 

instruments due to financial distress whereby (1) the principal promise to an investor is reduced 

according to the terms of the indenture or other governing agreement11, or (2) an obligor offers 

investors a new or restructured debt, or a new package of securities, cash or assets and the exchange has 

the effect of allowing the obligor to avoid a contractually-allowable payment omission as described in 

b) above12.

7 Moreover, unlike a general tax on financial wealth, the imposition of a tax by a sovereign on the coupon or principal 

payment on a specific class of government debt instruments (even if retroactive) would represent a default. Targeted 

taxation on government securities would represent a default even if the government’s action were motivated by 

fairness or other considerations, rather than inability or unwillingness to pay.

8 For example, a debt security would become impaired when an obligor exercises a payment-in-kind option on a toggle 

bond. Examples of impairment events on non-debt securities include dividend omissions on preferred stock (both 

cumulative and non-cumulative) and coupon omissions on other hybrid debt securities.

9 Moody’s studies of historical impairments are likely to focus on those impairments that are sustained and not cured. 

Among some structured finance asset classes, where cure rates within a 12-month time frame can be high, many 

impairments are not likely to be included in impairment studies.

10 Impairment distressed exchanges are similar to default distressed exchanges except that they have the effect of 

avoiding an impairment event, rather than a default event.

11 While contractually-allowable principaL write-downs on structured finance securities are impairments, failures to pay 

principal as contractually required are defaults. Once written down, compLete cures, in which securities are written 

back up to their original balances are extraordinarily rare; moreover, in most cases, a write-down of principal leads to 

an immediate and permanent loss of interest for investors, since the balance against which interest is calculated has 

been reduced.

12 Examples of such impairments incLude mandatory conversions of contingent capital securities to common equity and 

mandatory write-downs of other hybrid securities that are the direct result of obligor distress.
36 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

The impairment status of a security may change over time as it migrates from impaired to cured (e.g., 

if initially deferred cumulative preferred dividends are ultimately paid in full) and possibly back again 

to impaired.

Definition of Loss-Given-Default

The loss-given-default rate for a security is 100% minus the value that is received at default resolution 

(which may occur at a single point in time or accrue over an interval of time), discounted by the coupon 

rate back to the date the last debt service payment was made, divided by the principal outstanding at the 

date of the last debt service payment.

In the special case of a distressed exchange default, when an investor is given new or modified securities 

in exchange, the LGD rate is 100% minus the trading value of the new securities received in exchange 

at the exchange date divided by the par value plus accrued interest of the original securities as of the 

exchange date.

Credit Rating Methodologies

Credit Rating Methodologies describe the analytical framework MIS rating committees use to assign 

credit ratings. They set out the key analytical factors which MIS believes are the most important 

determinants of credit risk for the relevant sector. Methodologies are not exhaustive treatments of all 

factors reflected in MIS’ ratings; they simply set out the key qualitative and quantitative considerations 

used by MIS in determining ratings. In order to help third parties understand MIS’ analytical approach, 

all methodologies are publicly available.

Methodologies governing fundamental credits (e.g., non-financial corporates, financial institutions 

and governments) generally (though not always) incorporate a scorecard. A scorecard is a reference tool 

explaining the factors that are generally most important in assigning ratings. It is a summary, and does 

not contain every rating consideration. The weights shown for each factor and sub-factor in the scorecard 

represent an approximation of their typical importance for rating decisions, but the actual importance 

of each factor may vary significantly depending on the circumstances of the issuer and the environment 

in which it is operating. In addition, quantitative factor and sub-factor variables generally use historical 

data, but our rating analyses are based on forward-looking expectations. Each rating committee will apply 

its own judgment in determining whether and how to emphasize rating factors which it considers to be 

of particular significance given, for example, the prevailing operating environment. As a consequence, 

assigned ratings may fall outside the range or level indicated by the scorecard, though they will generally 

be within one to two notches of the scorecard-indicated rating.

Methodologies governing structured finance credits often mention one or more rating models. A 

structured finance ratings model is a reference tool that explains how certain rating factors are considered 

in estimating a loss distribution for the collateral assets, or how the interplay between collateral cash 

flows, capital structure and credit enhancement jointly influence the credit risk of different tranches 

of securities. While methodologies may contain fixed values for key model parameters to be applied to 

transactions across an entire sector, individual rating committees are expected to employ judgment in 

determining model inputs, and rating committee deliberations may fall outside model-indicated outputs.

While most methodologies relate to a particular industry, sector or class of issuers or transactions, a small 

number — ‘cross-sector methodologies, many originally issued as ‘Rating Implementation Guidance’ — 

have implications for a number of (and in some cases all) sectors. Examples include the methodologies 

which govern:
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 37

» the assignment of short-term ratings across the Fundamental Group;

» the use of credit estimates in the analysis of structured finance transactions

» the linkage between sovereign ratings and related ratings in other Fundamental Groups; 

» the ‘notching’ guidelines used to assign ratings to different classes of corporate debt;

» and the determination of country ceilings which cap domestic ratings.

Typically, these are broad commentaries, the output of which may be general guidance to committees 

on ranges or caps on ratings rather than a specific rating assignment and which, to a greater extent than 

sector-specific methodologies, set out broad principles and relationships rather than detailed risk factors 

which can be summarized in a scorecard. However, in other respects cross-sector methodologies are 

no different from any sector-specific methodology, in providing an analytical framework to promote 

consistency rather than a set of rules which must be applied rigidly in all circumstances.

The set of methodologies comprises both ‘primary’ and ‘secondary’ methodologies, particularly in 

structured finance. Some secondary methodologies provide detailed guidance on the application of 

particular elements of broader ‘primary’ methodologies to particular sectors or regions, including in some 

cases the key model parameters deployed in assigning ratings in that region or sector. They need to be 

read alongside the relevant primary methodology.

Key Rating Assumptions

Methodologies may (but need not) contain separately identifiable key rating assumptions (“KRAs”). 

KRAs are the fixed inputs (sometimes expressed as a possible range of values) described in Credit Rating 

Methodologies such as mathematical or correlation assumptions which are common to broad classes of 

ratings, may be common to multiple Credit Rating Methodologies, and which inform rating committee 

judgments in assigning ratings across each class. KRAs are considered methodological and are subject 

to the same governance process as the methodology to which they relate, including the need for any 

changed to be approved by the relevant Policy Committee within MIS.

KRAs are, by their nature, relatively timeless inputs to the analytical process, and because they seek to 

bring a degree of stability, consistency and transparency to something that may in practice be uncertain, 

they are intended to be reasonably resilient to change. They may change over time in response to longterm structural changes or as more is learnt about long-run relationships between risk factors, but 

they would be very unlikely to change as a result of a short-run change in economic or financial 

market conditions.

By contrast, credit judgments reached in rating committees or similar forums regarding the impact of 

prevailing credit conditions on ratings within a particular sector, country or region are not KRAs, even 

where those judgments affect a large number of Credit Ratings (for example because they alter a country 

ceiling, systemic support indicator or a Timely Payment Indicator). Moreover, rating committees will, 

from time to time, reach credit judgments in relation to the application of KRAs in the assignment 

of credit ratings for a particular deal or set of deals which are the subject of that rating committee, to 

reflect prevailing credit conditions in the relevant region or sub-sector (for example to apply higher or 

lower correlation assumptions while a given set of credit conditions persist). Such judgments would 

not be deemed to have amended a KRA, since they were not intended to be applied consistently and 

systematically across most if not all debt instruments covered by the relevant methodology, and in 

a manner which was largely insensitive to further changes in credit conditions. Macro-economic or 

financial market projections which are by definition specific to a particular point in time are not KRAs.
38 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

For Structured Finance Credit Rating Methodologies, KRAs are generally assumptions that underlie 

the overall methodological construct — values assigned to parameters which influence the analysis of a 

prototypical transaction broadly across the relevant sector. Examples would include:

» sector correlation assumptions;

» loss severity assumptions for particular sectors;

» and idealized default rates when used as a proxy for collateral performance,

Inputs to the rating of structured finance transactions that result from credit judgments reached by 

rating committees or which reflect analytic deliberations in similar forums and that are not KRAs 

include, for example:

» the credit risk considerations (as reflected in credit ratings or other credit assessments) introduced 

by third parties, such as guarantors and other support providers, servicers, trust banks, swap 

providers, etc;

» the credit risk introduced by the issuer’s operating environment, as reflected, for example, by bond 

and deposit ceilings;

» changes in collateral asset risk expectations brought on by changes in the economic environment; 

and

» the maximal extent to which a bank’s legal and operating environment would enable 

overcollateraliza¬tion to provide lift for a covered bond’s rating over the bank’s own rating, as 

expressed in the Timely Payment Indicator.

For Fundamental Credit Rating Methodologies, KRAs are intrinsically less common (in part reflecting 

the less quantitative nature of Fundamental credit analysis), and where they do exist they may be 

embedded within the underlying Credit Rating Methodology. Generally, they are so deeply embedded 

in the overlying analytical structure that it would be meaningless and misleading to identify them as 

distinct from the Credit Rating Methodology itself: a KRA change would almost inevitably involve a 

corresponding change to the Credit Rating Methodology itself. Examples of deeply embedded KRAs 

in Fundamental that cannot be viewed distinctly from a Credit Rating Methodology include:

» the assumption that leverage and access to liquidity are strong drivers of credit risk and appropriate 

factors to include in Credit Rating Methodologies;

» the assumptions that there is very strong interdependence between bank and sovereign credit strength 

(from which MIS concludes that a lower-rated sovereign cannot generally provide ratings lift through 

support to a higher rated bank);

» the assumption that legal priority of claim affects average recovery on different classes of debt sufficiently to warrant higher or lower ratings for different classes of debt.

» and the assumption that sovereign credit risk is strongly correlated with that of other domestic issuers.

Examples of assumptions in Fundamental Credit Rating Methodology that would be considered 

KRAs distinct from (though perhaps stated in) the Credit Rating Methodology to which each relates 

would include

» loss severity assumptions for different sectors;

» and idealized loss rates when used as a proxy for (for example) the ability of a sovereign to support its 

banking system;
RATING SYMBOLS AND DEFINITIONS MOODY’S INVESTORS SERVICE 39

Inputs to the fundamental ratings process that result from credit judgments reached by rating committees 

or which reflect analytic deliberations in similar forums which are not KRAs include:

» the credit risk considerations (as reflected in credit ratings or other credit assessments) introduced by 

third parties, such as guarantors and other support providers or affiliates;

» the credit risk introduced by the issuer’s operating environment, as reflected, for example, by bond 

and deposit ceilings; and

» the ability a sovereign to provide support to, for example, banks, as expressed in a systemic 

support indicator.

» Such inputs may incorporate underlying assumptions which may be KRAs.

Special Comments

MIS may from time to time issue Special Comments relating to particular industries, sectors, 

commodities, regions or issuers. Special Comments are not methodological either in content or in intent 

and do not modify the analytical approach described in rating methodologies. Rather, Special Comments 

are generally intended (i) to set out MIS’s views on issuer-specific concerns or developments (ii) to 

describe macroeconomic or sector trends (such as changing industry demand conditions, new legislation 

or regulatory developments) and to comment on their directional impact on ratings, and (iii) to explain 

certain rating processes to help investors better understand how MIS’s analysts do their work, including 

explaining how MIS will assess the impact of specific or broader trends

Country Ceilings for Bonds and Other Foreign Currency Obligations

Moody’s assigns long-term and short-term ceilings for foreign-currency bonds and notes to every country 

(or separate monetary area) in which there are rated obligors. The ceilings generally indicate the highest 

ratings that can be assigned to a foreign-currency denominated security issued by an entity subject to the 

monetary sovereignty of that country or area. Ratings that pierce the country ceilings may be permitted, 

however, for foreign-currency denominated securities benefiting from special characteristics that are 

judged to give them a lower risk of government interference than is indicated by the ceilings. Such 

characteristics may be intrinsic to the issuer and/or related to Moody’s view regarding the government’s 

likely policy actions during a foreign currency crisis. The country ceilings for foreign-currency bonds and 

notes are expressed on Moody’s long-term and short-term global scales.

Country Ceilings for Foreign Currency Bank Deposits

Moody’s assigns long-term and short-term ceilings for foreign-currency bank deposits to every country 

(or distinct monetary area) in which there are rated bank deposits. The ceilings specify the highest ratings 

that can be assigned to foreign-currency denominated deposit obligations of 1) domestic and foreign 

branches of banks headquartered in that domicile (even if subsidiaries of foreign banks); and 2) domestic 

branches of foreign banks. The country ceilings for foreign-currency bank deposits are expressed on 

Moody’s long-term and short-term global scales.

Country Ceiling for Bonds and Other Local Currency Obligations

Moody’s assigns a local currency ceiling for bonds and notes to every country (or distinct monetary areas) 

in order to facilitate the assignment of local currency ratings to issues and/or issuers. Local currency 

ratings measure the credit performance of obligations denominated in the local currency and therefore 
40 MOODY’S INVESTORS SERVICE RATING SYMBOLS AND DEFINITIONS

exclude the transfer risk relevant for foreign-currency obligations. They are intended to be globally 

comparable.

The local currency country ceiling for bonds summarizes the general country-level risks (excluding 

foreign-currency transfer risk) that should be taken into account in assigning local currency ratings to 

locally domiciled obligors or locally originated structured transactions. They indicate the rating level that 

will generally be assigned to the financially strongest obligations in the country, with the proviso that 

obligations benefiting from support mechanisms based outside the country (or area) may on occasion 

be rated higher. The country ceiling for local currency bonds and notes is expressed on the long-term 

global scale.

Local Currency Deposit Ceiling

Moody’s Local Currency Deposit Ceiling for a country or monetary region is the highest rating that can 

be assigned to the local currency deposits of a bank or other deposit taking institution domiciled within 

that rated jurisdiction. It reflects the risk that governmental authorities might impose a freeze on all local 

currency bank deposits in the system in response to a systemic run on deposits or a heightened risk of 

such a run. The local currency deposit ceiling is expressed on the long-term global scale.

Hybrid Security Baskets

In determining equity credit for a hybrid security, Moody’s analyzes the instrument along three 

dimensions of equity: No Maturity, No Ongoing Payments, and Loss Absorption. For each of these 

dimensions, Moody’s ranks the instrument’s features as either None, Weak, Moderate, or Strong, where 

None represents more debt-like and Strong represents more equity-like. The equity credit assigned to the 

instrument — expressed in baskets from A to E — weights the rankings for each dimension depending 

on the credit quality of the issuer.

CLASSIFICATIONS FOR HYBRID BASKETS

BASKET DEBT EQUITY

A 100% 0%

B 75% 25%

C 50% 50%

D 25% 75% 

E 0% 100%

Timely Payment Indicator (TPI)

A TPI is Moody’s assessment of the likelihood that timely payment would be made to covered 

bondholders following an Issuer Default. TPIs are assigned one of the following six assessment levels: 

Very High, High, Probable-High, Probable, Improbable, Very Improbable.
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