Explanatory Note on Non-Registered Credit Rating | BNP Paribas Securities (Japan) Limited

Forward to a friendForward to a friend PrintPrint

BNP Paribas Securities (Japan) Limited

From the viewpoint of ensuring fairness and transparency in the markets, the Financial Instruments and Exchange Law has introduced a registration system for credit rating agencies. In accordance with this regulation, financial instruments firms are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by non-registered credit rating agencies.

 

Rationale for the Registration System

Registered credit rating agencies are subject to regulations such as: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, non-registered credit rating agencies are not subject to such regulation or supervision.

 

About Credit Rating Agencies

 

  • Moody’s Investors Service

 

Name of the Credit Rating Agency Group, etc.

Name of the Credit Rating Agency Group:
Moody’s Investors Service (“Moody’s”)

Name of the Registered Credit Rating Agency within the Group and its Registration Number:
Moody’s Japan K.K. (FSA Commissioner (Rating) No. 2)

 

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Matters Related to the Explanation of Non-Registered Ratings” (「無登録格付説明関連」) in the page of “Use of Credit Ratings Given by Non-registered Companies” (「無登録業者の格付の利用」) which is displayed after clicking “Credit Rating Business” on the website of Moody’s Japan K.K. (https://www.moodys.com/pages/default_ja.aspx).

 

Assumptions, Significance and Limitations of the Rating

Credit ratings are Moody’s Investors Service’s (“MIS”) current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. MIS defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default. Credit ratings do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such rating or other opinion or information is given or made by MIS in any form or manner whatsoever.

Based on the information received from issuers or from public sources, the credit risks of the issuers or obligations are assessed. MIS adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MIS considers to be reliable. However, MIS is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

This information is prepared based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the Moody’s Japan K.K. website.

 

 

  • S&P Global Ratings

 

Name of the Credit Rating Agency Group, etc.

Name of the Credit Rating Agency Group:
S&P Global Ratings (“S&P”)

Name of the Registered Credit Rating Agency within the Group and its Registration Number:
S&P Global Ratings Japan K.K. (FSA Commissioner (Rating) No. 5)

 

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Non-Registered Rating Information” (「無登録格付け情報」http://www.standardpoors.co.jp/unregistered) which can be found in the menu under “Library/Regulation Related” (「ライブラリ・規制関連」) on the website of S&P Global Ratings Japan K.K. (http://www.standardpoors.co.jp).

 

Assumptions, Significance and Limitations of the Rating

Credit ratings assigned by S&P Global Ratings (“S&P”) are opinions of the future credit quality of specific issuers or issues as of the date they are expressed, and it is not an index which shows the probability of the occurrence of the failure to pay by the issuers or a particular debt, and do not guarantee the credit worthiness. Credit ratings are not a recommendation to purchase, sell or hold any securities, or a statement of market liquidity or prices in the secondary market of any issues.

Credit ratings may change depending on various factors, including issuers’ performance, changes in external environment, performance of underlying assets, creditworthiness of counterparties and others. S&P conducts rating analysis based on information it believes to be provided by the reliable source in terms of quality and quantity. However, S&P does not perform an audit, due diligence or independent verification of any information it receives from the issuers or a third party, or guarantees its accuracy, completeness or timeliness of the results gained from the information. Moreover it needs to be noted that it may incur a potential risk due to limitation of the historical data that are available for use depending on the rating.

This information is prepared based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the S&P Global Ratings Japan K.K. website.

 

 

  • Fitch Ratings

 

Name of the Credit Rating Agency Group, etc.

Name of the Credit Rating Agency Group:
Fitch Ratings (“Fitch”)

Name of the Registered Credit Rating Agency within the Group and its Registration Number:
Fitch Ratings Japan Limited (FSA Commissioner (Rating) No. 7)

 

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Overview of Policies etc. for Credit Rating” (「格付方針等の概要」) in the “Regulation Related” (「規制関連」) section on the website of Fitch Ratings Japan Limited (http://www.fitchratings.co.jp/web/).

 

Assumptions, Significance and Limitations of the Rating

Ratings assigned by Fitch are opinions based on established criteria and methodologies. Ratings are not facts, and therefore cannot be described as being “accurate” or “inaccurate”. Credit ratings do not directly address any risk other than credit risk. Credit ratings do not comment on the adequacy of market price or market liquidity for rated instruments. Ratings are relative measures of risk; as a result, the assignment of ratings in the same category to entities and obligations may not fully reflect small differences in the degrees of risk. Credit ratings, as opinions on relative ranking of vulnerability to default, do not imply or convey a specific statistical probability of default.

In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The assignment of a rating to any issuer or any security should not be viewed as a guarantee of the accuracy, completeness, or timeliness of the information relied on in connection with the rating or the results obtained from the use of such information. If any such information should turn out to contain misrepresentations or to be otherwise misleading, the rating associated with that information may not be appropriate.  Despite any verification of current facts, ratings can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed.  The detailed explanation for assumptions, significance and limitations of the rating is available under 「格付け及びその他の形態の意見に関する定義」on the Japanese Website of Fitch.

This information is prepared based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the Fitch Ratings Japan Limited website.

  • BNP Paribas