Upon the roll-out of a new rating model and/or a newly recalibrated (optimised) rating model, institutions should update client ratings as soon as possible. Institutions should assign new ratings with the new model to 70% of the existing obligors (entering the model scope) within six (6) months and to 95% of the existing obligors within nine (9) months. The assignment of new ratings should be based on financials that have been updated since the issuance of the previous rating, if they exist. Otherwise prior financials should be used. This expectation applies to wholesale and retail models.
2.9.2
In order to achieve this client re-rating exercise in a short timeframe, institutions are expected to rate clients in batches, performed by a team of rating experts, independently from actual, potential or perceived business line interests.
2.9.3
Institutions should put in place a process to monitor the usage of rating models. At a minimum, they should demonstrate that the following principles are met:
(i)
All ratings should be archived with a date that reflects the last rating update. This data should be stored in a secure database destined to be employed on a regular basis to manage the usage of rating models.
(ii)
The frequency of rating assignment should be tracked and reported to ensure that all obligors are rated appropriately in a timely fashion.
(iii)
Each rating model should be employed on the appropriate type of obligor defined in the model documentation. For instance, a model designed to assess large corporates should not be used to assess small enterprises.
(iv)
Institutions should ensure that the individuals assigning and reviewing ratings are suitably trained and can demonstrate a robust understanding of the rating models.
(v)
If the ratings are assigned by the business lines, these should be reviewed and independently signed-off by the credit department to ensure that the estimation of ratings is unbiased from short term potential or perceived business line interests.