It is important to note the trend and stability of the KBRA ratings. A downward trend in an entity’s rating indicates deterioration in the entity's financial condition. Continuous changes in a rating may be indicative of instability.
Financial institutions with non-investment grade ratings (C through E) are likely to have financial problems and the user should take measures to secure credits with those entities.
Under the KBRA Rating System, weights are placed on the four core components: liquidity, asset quality, capital and earnings. The weight can shift depending on other financial factors. For example, if asset quality, capital and earnings conditions of a bank are sound then the liquidity weight is relatively low. However, if any of these factors weaken significantly or in aggregate for a bank that is dependent on borrowed funds, then the liquidity factor is given greater weight.
Click here for a more in depth description of Kroll Bond Ratings' rating methodology for each class of institutions we rate.
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