Banks Methodology Updates - AMER/EMEA
Today, we published an update to the Banks Methodology which contains a number of updates to our Baseline Credit Assessment (BCA) framework. While we maintain our overall methodological approach, the changes we have made reflect the evolution of bank credit risk and regulation, and insights we have gleaned from adverse credit events, alongside our forward looking-view of evolving risks.
These include:
- Changes to metrics or sources of metrics and the recalibration of thresholds for the Capital, Funding Structure and Liquid Resources subfactors of the Financial Profile and for the Credit Conditions factor of the Macro Profile.
- We have added new adjustments and refined existing adjustments to the Financial Profile subfactor scores and to the Macro Profile factor scores.
- We have provided greater clarity on how we apply Qualitative Adjustments notching for outsized strengths and weaknesses that we might not otherwise fully capture in the Financial Profile.
- We also have made updates to reflect our shift to a principles-based approach to applying scenario analysis and stress testing.
- Within the Loss Given Failure and Additional Notching Considerations component, we have simplified our presentation of the Additional Notching Considerations subcomponent by using a principles-based approach.
As a result of comments received in response to our Request for Comment (RFC) ‘Banks: Proposed Methodology Update’, published on 30 April 2025, and our internal review, we have made a number of changes to the approach we presented in the RFC:
- The most material of these relate to the Capital subfactor, where we have removed the proposed RWA density adjustment.
- We have reintroduced a qualitative adjustment for unweighted leverage and added a downward adjustment that we may apply to banks that report using internal ratings-based models in calculating risk weights for a significant proportion of their exposures. Both of these considerations inform our assessment of a bank’s risk profile, based on the framework they use to calculate RWAs.
- We have also recalibrated the Capital ratio thresholds, primarily for the Very Strong + and Moderate categories, and we have introduced guidance for assigned scores to reflect “fully loaded” capital levels.
We invite you to join our webinar, which we will be hosting on 21 November where we will discuss the proposed changes.
This session will provide you an opportunity to gain a comprehensive understanding of the changes, including the modifications we have made since our RFC.
Speakers
Simon Ainsworth
Associate Managing Director, Financial Institutions
Moody's Ratings
Megan Fox
Associate Managing Director, Financial Institutions
Moody's Ratings
Bernhard Held
Vice President - Senior Credit Officer, Financial Institutions
Moody's Ratings
Edoardo Calandro
Vice President – Senior Credit Officer, Financial Institutions
Moody's Ratings
Laura Barrientos
Vice President - Senior Credit Officer / MDG, Credit Strategy & Standards
Moody's Ratings
Lynn Merhi
Analyst, Financial Institutions
Moody's Ratings
Daniella Aruina
Analyst, Financial Institutions
Moody’s Ratings
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Simon Ainsworth, who is based in London, is an Associate Managing Director responsible for the analytical teams maintaining ratings on Nordic and Baltic banks and on a range of European insurance companies.
Simon previously served as a Group Credit Officer. In that role he carried responsibility for monitoring ratings quality as well as assisting in the development and implementation of rating methodologies and practices applied to rated financial institutions within the EMEA region.
Simon joined Moody’s in March 2014 following sixteen years at the Bank of England.
At the Bank, he worked in a variety of roles primarily in its financial markets and banking operation divisions; as well as working on a variety of financial risk and crisis related issues. This included the resolution of failed banks, as well as responsibility for the risk management framework applied to collateral accepted in the Bank’s sterling market operations.Simon graduated from the University of Durham in 1998, having studied Economics and Politics. He is based in London.
Megan Fox is an Associate Managing Director in the Financial Institutions Group at Moody’s Ratings. She oversees the North American team responsible for the ratings and research of a portfolio spanning US-based global investment and universal banks, securities firms, asset managers and Canadian banks.
Before leading the team, Megan spent nearly 15 years as a Moody’s Ratings analyst covering a broad range of global investment, universal, US regional and community banks.
Prior to joining Moody’s Ratings, Megan held positions at Freddie Mac, primarily within the Finance department. She holds an honors degree in economics and political science from the University of Delaware.
Bernhard is lead analyst for a number of banks in Germany and Austria.
Prior to joining Moody’s in 2014, he worked for Allianz SE as a Financial Analyst with firm-wide credit portfolio responsibilities. Prior to that, he was a Credit Risk Officer at EADS (now Airbus) and a Senior Risk Manager / Senior Analyst in Corporate and Structured Finance at LBBW in Germany and Luxembourg.
Bernhard is a CFA charter holder and has obtained the PRM designation. He holds a Master’s Degree in European Business Studies & Management from Otto-Friedrich University at Bamberg (Germany) and speaks German, English, Spanish and French.
Edoardo Calandro is a member of Moody’s EMEA Banking Team based in London, with lead responsibilities for a portfolio of banks headquartered in the UK.
Since joining Moody’s in 2008, Edoardo worked on banks’ ratings and research; prior to his current focus on UK banks, he held lead responsibilities for Italian and Turkish bank ratings.
Edoardo holds a bachelor’s degree in management and a master’s degree in finance and accounting from Bocconi University in Milan.
Laura Barrientos is a Vice President – Senior Credit Officer in the Methodology Development Group (MDG) at Moody’s Ratings. During her seven years in MDG, Laura has led a variety of methodology development projects, including the Request for Comment on Moody’s approach to rating banks published in April 2025.
Previously, she was a lead analyst covering project finance and infrastructure, and regional and local governments, among other sectors.
Prior roles include working as a senior consultant at the US Department of the Treasury, Office of Technical Assistance.
Laura holds a Bachelor’s degree in Psychology and a Master’s degree in Public Affairs from the University of Texas at Austin.
Lynn Merhi is an Analyst with Moody’s Financial Institutions Group and is based in London, covering a portfolio of Turkish and other emerging market banks. She joined Moody's in 2022.
Prior to joining Moody's, Lynn held positions as a risk analyst at Byblos Bank and Lebanon and Gulf Bank in Lebanon. She holds a degree in Business Administration with an emphasis on Finance from the American University of Beirut, a Masters in International Trade and Business from ESIC and is a certified Financial Risk Manager from the Global Association of Risk Professionals.
Daniella Aruina is a Lead Analyst on the Financial Institutions Group team, based in London. She covers UK and Irish banks, building societies and finance companies. Daniella joined Moody’s in 2022 as a Ratings Associate, assisting with ratings of global investment banks, UK banks, finance companies and securities firms. Prior to joining Moody's, Daniella worked as an investment banking analyst at Jefferies. Daniella holds a B.A. degree in Economics from NYU Abu Dhabi.