A Financial Reliability Rating is an NRA’s opinion of a rated entity's ability to meet its financial and contractual obligations, first of all to its clients and counterparties. The ratings are assigned to entities that because of the specifics of their operations usually do not have any obligations in respect of loans, credit facilities or debt securities.
A trust (asset management) company is a professional stock market trader that executes trades on its own behalf and using its own judgment, but in the interests of its client (a pool of clients). A professional trust company normally provides the management of collective investment schemes, including open-end funds, as well as the pension savings, assets and reserves of private pension managers (PPMs), insurers’ reserves and funds of corporate entities and individuals under individual trust deeds (ITDs).
The purpose of this methodology is to determine a trust company’s stand-alone financial reliability rating (assuming that no external support is forthcoming). An all-in rating is determined based on this methodology plus the support rating methodology.
The rating is valid for one year from the date of assignment and is subject to update, not less frequently than once a year.
The Financial Reliability Rating Scale
To conduct a comprehensive and fullest possible financial and qualitative review, the Agency requests the trust company’s reporting disclosures and financial information, including a filled-in NRA’s Questionnaire, corporate disclosure and information about the risk management system and additionally itemized financial statements, including t breakdown of balance sheet assets and assets under management, information about the company’s key clients, information on the net asset value (NAV) of mutual funds under the company’s management, and on existing agency agreements.
NRA’s Financial Reliability assessment methodology for trust companies considers the rated entity’s level of transparency, and the depth and reliability of information provided for the analysis purposes. The rating may be affected if the rated entity is not transparent enough, or if the provided information is out-of-date or unreliable.
This methodology uses a scoring system based on the scores for different rating factors analyzed in applying a rating model.
To arrive at the final score included in the rating model, the analysts review the input data, including the expert evaluation of qualitative parameters and quantitative score estimates.
The analysis model includes the following “building blocks” (blocks):
