DEXTRO’s New Risk Class Methodology

Definitions, Symbols

A new risk class methodology with seven risk classes (RK1 to RK7 similar to MiFiD II or SRRI) and at the same time emancipation from the dogma of “historical volatility” should determine the risk ratings of the DEXTRO Group in the future, which will continue to be based on the pillars of forecast risk / return volatility, capital loss probability and total loss probability.

The current concept of the SRRI (Synthetic Risk and Reward Indicator) provides for seven risk classes. The SRRI provides the risk and reward indicator for mutual funds and is a helpful metric for investors.

According to the requirements of the small investor protection and the European legal regulations, fund companies have to show the risk indicator. In Germany, this is usually done in the sales prospectus or other sales documents of a fund, especially in the so-called “key investor information” (“WAI” or “KIID”).

This approach is considered sensible and welcomed by the DEXTRO Group. The DEXTRO Group is adapting the risk classification accordingly. The new regime from January 2022 offers a differentiated view with seven levels compared to the previous WpHG standard with five risk classes.

The process of risk classification of financial investment products (e.g. AIF participation, equity ETF, bond or subordinated loan) is analogous to the rating process and is based on its results. In contrast to the rating determination, however, the risk classification focuses on the consideration of the risk components of an investment product and subjects these to a comparison with the typical financial investment products of the respective risk classes.

Previously: WpHG risk classes RK1 (very low) to RK5 (very high)

New: DEXTRO Group’s risk indicator in risk classes RK1 (lower risk to 7 (higher risk).

In the new regime of the DEXTRO Group, the classification for funds without historical data is not limited to risk classes RK5 to RK7. In particular, the characteristics of the categories of capital loss and total loss probability can be significantly differentiated between different investment products in the new RK regime with seven levels. Blind pool concepts without a track record of the asset manager are primarily to be expected in risk class RK6.

Various variables form the core of the risk classification as criteria and have an influence on the end result:

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Liability of Credit Rating Agencies for Issue Ratings


A new article discusses a dissenting verdict on the rating of a cruise ship bond.

The numerous decisions of the Berlin courts have brought the issue of the liability of rating agencies back into focus, writes lawyer Dr. Sunny Kapoor, Frankfurt a. M., in his article “Haftung von Ratingagenturen für Emissionsratings” (WM 2021 Heft 50-52, 2420). “They are of particular interest because they highlight the liability of rating agencies for allegedly incorrect issue ratings,” says Dr. Sunny Kapoor, “whereby the judgments available so far concern liability for issuer ratings. The judgments of the Regional Court of Berlin and the District Court of Berlin Mitte are in line with the previous overall evaluation and deny any liability on the part of rating agencies to investors.”

The question of the liability of rating agencies has been preoccupying the courts for several years. In the judgments issued so far, however, the claims of investors have always been dismissed and the question of third party liability of rating agencies has been answered in the negative. A common feature of the judgments known so far is that they focus on liability for allegedly incorrect issuer ratings. With the judgment of the 11th Civil Chamber of the Berlin Regional Court on May 5, 2020, a court decision has become known for the first time, which concerns the question of liability for issue (and not issuer) ratings.

This judgment is noteworthy for two reasons, according to Dr. Sunny Kapoor:

  • On the one hand, as far as can be seen, a German court has for the first time affirmed the liability of a rating agency to an investor for an allegedly incorrect rating.
  • On the other hand, the judgment emerged from a number of otherwise largely unsuccessful investor lawsuits that were brought against a European rating agency in connection with a bond it rated for the luxury cruise ship “MS Deutschland”.

Even though the judgments in this case are not yet final, it is nevertheless of interest to highlight the main reasons for rejection and, above all, to work out the first milestones for liability for issue ratings with a view to the differing judgment of the 11th Civil Chamber.

The only different decision of the 11th Civil Chamber should, however, have to be provided with some legal question marks, believes Dr. Sunny Kapoor. In any case, his evaluation of the judgments concludes that when it comes to the question of whether rating agencies are liable to investors for an allegedly incorrect rating, proof of the causality of the transaction should be decisive.

“Accordingly,” reasons Dr. Sunny Kapoor, “the investor must have taken note of the rating report and used it as the basis for his investment decision. Since the rating report usually also contains risk information or enables the investor to assess his own risk, it would be difficult to argue that the investor still assumed that the investment would be highly secure.”

In addition, an extension of liability on the basis of the contract with protective effect in favor of third parties should also have to be dealt with restrictively, in his opinion. Because in individual cases it should not only be doubtful whether the rating agency can actually identify and narrow down the group of investors to be included in the rating agreement.

“The question also arises as to whether the issuer commissioning the rating agency has a serious interest in including a large number of investors in the rating agreement. Ultimately, such a far-reaching extension of liability is likely to lead to a considerable increase in the cost of rating services.” Likewise, the extension of liability is likely to reduce the attractiveness of the issue rating for rating agencies.

However, if rating agencies shy away from creating issue ratings, an important point of reference for investment decisions would be lost, which, conversely, could not have a negligible effect on the entire capital market.

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US Agencies’ Market Shares Remain a European Debacle


The excessive regulation of rating agencies in the European Union (EU) has failed to achieve its goal.

The dominance of US rating agencies remains. Their ratings are practically the only decisive factor for the allocation of the economic resource “capital” in Europe. The three leading US agencies S&P Global Ratings Europe, Moody’s Investors Service and Fitch Ratings now account for 92.19% of turnover – and that even after “Brexit”, although the US agencies in the Anglo-Saxon region have natural advantages and these turnover shares are no longer included in new calculations.

The market share of these three agencies, S&P Global Ratings Europe, Moody’s Investors Service and Fitch Ratings, is, for example, 87.02% after 2012 and 91.07% in the last year 2019, now 92.19% in 2020. Politicians in Europe once thought they could use the opportunity of the global financial crisis to put the US agencies in their place.

It should also be noted in these figures that a number of credit rating agencies took steps to ensure the continuity of their rating activities before the UK’s exit from the EU was completed on December 31, 2020. Rating agencies, which – like the US market leaders – have a significant presence in the UK, have taken different approaches to restructuring their businesses. These changes impacted rating agencies’ applicable trunover from EU credit rating activities in 2020 and are reflected in the changes in rating agencies’ market shares in this year’s market share report.

Against this background, the changes in market share at S&P Global Ratings Europe and Moody’s Investors Service, but also at DBRS Ratings, can be seen in particular. With the new allocation, S&P Global Ratings Europe increases its market share in 2020 to 51.77% (from 40.40% in 2019), while Moody’s Investor Service keeps more sales in the United Kingdom (market share in the EU in 2020 only 30.12% after 33.12% in 2019). DBRS Ratings (1.11% 2020 after 2.99% 2019) as well as AM Best Europe-Rating Services (market share 2020 only 0.41% after 0.95% in 2019) lose market shares. All agencies that have given up market share have in common that they have their parent companies on the American continent and their main focus of activity in the most important European financial center, London, which was affected by Brexit.

Against the background of the effects mentioned, the increase in the market shares of the rating agencies remaining in the EU moves in the cosmetic area. CERVED Rating Agency (increase to 1.18% 2020 after 0.84% ​​2019), Scope Ratings (increase to 1.00% 2020 after 0.62% 2019) and CreditReform Rating (increase to 0.84% ​​after 0.53%). From the calculation mechanics of the market share calculation it follows that the other agencies can also show market share gains, although the dominance of the US agencies has not been broken.

The table published today by the European Securities and Markets Authority (ESMA) contains a list of all CRAs registered in the EU under the CRA regulation. For each rating agency, ESMA provides the applicable total market share. Finally, ESMA provides an indicator of whether a rating agency has an overall market share of less than 10%.

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Parthenon Capital Partners Bets On KBRA


KBRA, a full-service global rating agency committed to innovation and integrity, announced today it has entered a deal with leading growth-oriented private equity firm Parthenon Capital Partners who will acquire a majority stake in the company.

KBRA is a global credit rating agency found­­ed in the wake of the global financial crisis. “When KBRA was founded,” says KBRA CEO, President, and Co-Founder Jim Nadler, “our mission was to provide the market with timely, valuable, and transparent ratings and research. Over the past 11 years, KBRA has set the standard for engagement with investors, which has led to our leadership position across many markets. This investor engagement and outreach has also led to KBRA’s acceptance and reliance among issuers, policymakers, and key opinion leaders. As we continue to expand both domestically and abroad, we are excited to partner with Parthenon to accelerate our future growth.”

There are more rating agencies around the world fighting to break even than those that, like the leading agencies Moody’s and S&P Global, can offer top returns. In order to consolidate the rating industry, there is speculation as to how credit rating agencies could be merged or taken over in order to oppose the two leading agencies with another competitor with a global presence.

KBRA counts more than 400 employees across its five offices in the U.S. and Europe. The company has issued over 51,000 ratings with nearly $3 trillion in rated issuance since its inception in 2010. KBRA provides ratings and research across all sectors from its Corporate, Financial, and Government (CFG) and Structured Finance units. The company also delivers high-quality data, information, and tools to the market through innovative technology across its KBRA Analytics platform, including corporate and financial sector credit information and data and analytics.

“KBRA has quickly become a leading voice among the major global rating agencies. The market clearly relies on KBRA for holistic, transparent and thoughtful credit ratings and research” said Zach Sadek, a partner at Parthenon Capital.

“KBRA’s strong culture valuing integrity, ratings quality and customer service positions the firm for continued growth and success” said Brian Golson, Co-CEO of Parthenon Capital. “We look forward to partnering with KBRA’s passionate team to support their next chapter.”

Parthenon Capital’s financial advisor was Newbold Partners LLC and its legal advisor was Kirkland & Ellis LLP. KBRA received legal advice from Gunderson Dettmer LLP and Shearman & Sterling LLP.

Third Bond From Photon Energy N.V.

Actions, Reports

The third bond from Photon Energy N.V., a family-run, listed Dutch developer and operator of solar power plants for its own electricity production and for third parties, is new to the URA observation.

“In addition,” adds Jens Höhl, Managing Director of URA Research GmbH, “there have recently been activities such as electricity storage and water treatment.” Photon III – like the partially exchanged 2nd bond (2017/2022, still EUR 24 million outstanding) – received 1 “URA Check”.


The analysts at URA Research see the following strengths:

  • The main source of sales is electricity generation: a stable cash flow with mostly government-guaranteed long-term terms.
  • Unusually detailed quarterly financial reports (but only in English) and increase of the interest coupon by a high 1% if the self-chosen transparency obligations are violated.
  • It is a “green bond”: the sustainability in the sense of a conformity of the use of funds and reporting with the green bond principles of the ICMA was confirmed by imug rating GmbH in a second party opinion with “very good”.
  • Bonds significantly oversubscribed (green bonds strongly supported by regulatory requirements) and increased by EUR 5 million to EUR 55 million.
  • Quarterly interest payments and commitment to a minimum equity ratio (a supporting capital increase took place in 2021).


The URA Research analysts see the following weaknesses:

  • Comparatively small providers in a market with low entry barriers; broad regional presence (head office in NDL, bond in DEU, operational, mainly in Eastern Europe and Australia).
  • Great dependence on the weather as well as on government regulations and subsidies (most recently in some countries retroactive deterioration).
  • However, increased development of countries like Australia, in which solar power is competitive even without subsidies.
  • EBITDA interest coverage and net debt / EBITDA only sufficient due to low returns (e.g. rising personnel costs as advance payments in project development) as well as high financial debt and interest expenses typical of the industry.
  • The balance sheet equity was only positive as of September 30, 2021 due to a high revaluation reserve for property, plant and equipment (IFRS); the latter can also melt away quickly in the event of operational problems or rising discount rates.
  • In the last 5 years always a negative free cash flow including interest income (negative earnings after taxes in 8 of the last 10 years, very high investments in new solar power plants, especially in the last 3 years); this is unlikely to change much due to ambitious growth plans (including seven-fold increase in the output of their own power plants by the end of 2024) despite the planned five-fold increase in Group EBITDA.
  • The issuer is a pure holding company with no operational business. In order to serve the bondholders, it is therefore dependent on the interest payments for the shareholder loans granted (and their repayment) as well as on distributions from the around 120 subsidiaries. The latter have high bank liabilities with numerous “financial covenants” (in some cases including distribution limits); most of their assets are pledged to banks.

New On-Chain NFT Art Platform

Agencies, Uses

A leading online art marketplace, art market data and analytics provider, and global newswire, announced “ArtNFT”: this is Artnet AG’s launch of its on-chain NFT platform, its NFT Advisory Board, and ‘Artnet NFT 30’ report.

Artnet AG is listed in the Prime Standard of the Frankfurt Stock Exchange, the segment with the highest transparency standards. The majority of operations are run through its wholly-owned subsidiary, Artnet Worldwide Corporation, a New York based entity founded in 1989. Artnet Worldwide Corp. owns a London based subsidiary, Artnet UK Ltd.

Artnet’s marketplace connects leading galleries and auction houses with artnet’s global audience, offering a curated selection of over 250,000 artworks for sale worldwide. Artnet Auctions, the pioneering online-only auction platform, offers unprecedented reach, liquidity, and efficiency.

“As a pioneer of the online art industry, artnet is perfectly positioned to embrace the NFT space. Our goal is to bridge the gap between the crypto community and the traditional world of fine arts,” said Colleen Cash, Vice President of Artnet Auctions.

Artnet has an unparalleled 60 million unique users annually, making it the largest global platform for fine art. Founded in 1989, Artnet has revolutionized the way people discover, research and collect art today.

ArtNFT, Artnet’s first, on-chain NFT platform will launch on December 15, 2021, with a curated selection of works from the community’s top NFT artists. As an on-chain platform, Artnet’s goal is to provide collectors with a transparent, efficient, trustworthy, and integrated experience in their discovery and purchase of NFTs.
In order to provide the best possible works and user experience, Artnet also established an NFT advisory committee, bringing together industry experts and market and opinion leaders in the field.

Alongside the ArtNFT platform, Artnet will also publish its ‘Artnet NFT 30’ report, sponsored by ApeNFT. Harnessing the expertise of the Artnet News team and market data, the report shall provide a deep analysis of the NFT space and the people shaping its future. The development must be observed by everyone who deals with art ratings. Artnet’s data is a mission critical resource for the art rating industry, with a database of more than 15 million auction results and AI and ML driven analytics providing an unparalleled level of transparency and insight into the art market.

With the simultaneous release of the ArtNFT auction platform, the ‘Artnet NFT 30’ report, and supporting interviews with key players, Artnet is poised to become a destination for NFT artists, collectors, and professionals – continuing the company ethos of spearheading transparency, innovation, and positive change for the art industry. “The NFT world has built a multi-facetted community, and we are excited to introduce ArtNFT as a space to discover and engage with these cutting-edge works. With this launch, we are combining artnet’s global reach, knowledge and expert curation to deliver an integrated experience for the digital art world,” explained Artnet CEO Jacob Pabst.

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Scoring And Being Scored


Moody’s Corporation announced today that it has received an ‘A’ score from CDP on climate action for the second consecutive year. The top score recognizes Moody’s as one of a small number of high-performing companies out of nearly 12,000 that are leading actions to cut emissions, mitigate climate risks and develop the low-carbon economy.

It is the business of rating agencies to judge other companies. Rating and being rated – that is the practice at Moody’s. Not all rating agencies follow this model.

“As a member of CDP’s Reporter Services and Supply Chain programs, Moody’s Corporation has demonstrated environmental leadership and commitment to curb climate change within their business, as well as among their suppliers. Looking ahead, we are excited to see their continued dedication to transparency and prolonged effort to securing a net-zero, sustainable world,” said Simon Fischweicher, Head of Corporates and Supply Chains for CDP North America.

In 2021, Moody’s accelerated its commitment to achieve net-zero emissions by 2040, bringing its original target forward by ten years, and advanced its validated, interim net-zero science-based targets. Progress on these targets can be viewed in the following reports:

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Moody’s Updated Investor Presentation


Moody’s Corporation posted an updated management presentation for investors on its website,, reflecting certain information regarding the Moody’s results for the three months ended September 30, 2021, as well as updated full-year 2021 guidance as of October 28, 2021, and its posting is provided pursuant to Regulation FD. Senior management is expected use this updated presentation during meetings with analysts and investors.

According to the new presentation, Moody’s no longer sees itself as just a credit rating agency, as it was once split off from Dun & Bradstreet. Moody’s sees itself equally as a provider of financial intelligence and analytical tools supporting our customers’ growth, efficiency and risk management objectives and therefore as a global integrated risk assessment firm providing credit rating opinions, analytical solutions and insights that empower organizations to make better, faster decisions.

With Adjusted Operating Margin for Moody’s Investors Service of 61.5%, the rating agency is still the main cash cow, while Moody’s Analytics operates with a margin of 29.7%. Moody’s complete investor presentation can be downloaded here.

Use of ESG Rating Agencies Will Increase Dramatically


Nearly one in three (30%) pension funds and institutional investors say their use of ESG rating agencies will increase dramatically over the next three years, and a further 38% believe it will increase slightly. This is according to new research from quant technologies provider SigTech, who surveyed institutional investors across North America, Europe and Asia that collectively have around $935 billion of assets under management (please see the attached press release).

However, the findings reveal that 66% of professional investors interviewed said they struggle with ESG rating agencies because they can provide wildly divergent ESG scores at a company level.

Over the next three years, 14% of institutional investors surveyed by SigTech said they expect investor activism to increase dramatically, and a further 52% anticipate a slight rise.

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German Authority Restricting the Number of Bank Customers

Registrations, Regulations

The state specification of the number of customers and the limitation of the number of customers who – regardless of market demand – are allowed to use certain services, are typical features of a central administration economy in times of financial repression.

On October 5th, 2021, the Federal Financial Supervisory Authority (BaFin) ordered N26 Bank GmbH to take measures to restore proper business organization and to contain risks to operational resilience. A special representative appointed by BaFin will monitor the implementation of the measures ordered.

Specifically, BaFin has ordered the elimination of deficiencies, particularly in risk management in the areas of information technology and outsourcing management. The implementation must take place within a specified period.

The shortcomings in risk management are due to the strong growth of the bank, writes BaFin. In accordance with Section 45b (1) sentence 1 of the German Banking Act (KWG), BaFin has ordered risk minimization measures that limit customer growth and certain risk positions.

The growth in new customers of N26 Bank GmbH will be materially reduced and will be limited to 50,000 new customers per month. In addition, the exposure value on risk positions secured by real estate may not exceed EUR 500,000,000. This limit includes all countries in which N26 Bank GmbH is active.

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Assumptions of Implicit Government Support

Authorities, Criteria, Regulations

Why is it not wise to ignore an important dimension of the bank rating, not even for capital adequacy purposes?

According to the Basel Framework as it will appear in the future on January 1, 2025, banks incorporated in jurisdictions that allow the use of external ratings for regulatory purposes will assign to their rated bank exposures the corresponding “base” risk weights determined by the external ratings according to the following table:

External Credit Risk Assessment Approach

External rating of counterpartyAAA to AA–A+ to A–BBB+ to BBB–BB+ to B–Below B–
“Base” risk weight20%30%50%100%150%
Risk weight for short-term exposures20%20%20%50%150%
Risk weight table for bank exposures

“Such ratings must not incorporate assumptions of implicit government support, unless the rating refers to a public bank owned by its government. Banks incorporated in jurisdictions that allow the use of external ratings for regulatory purposes must only apply SCRA for their unrated bank exposures, in accordance with CRE20.21.”

This requirement contradicts the longstanding practice of leading rating agencies. Moody’s said in their banks’ rating methodology “our approach to incorporating our expectations related to various forms of external support, from affiliated entities, or from governments, based upon our Joint Default Analysis (JDA) framework.”

The requirement, that “such ratings must not incorporate assumptions of implicit government support, unless the rating refers to a public bank owned by its government”. The demand not only implies a disadvantage for private banks, which, due to their successful development and importance for the economy, can also count on political support. From an investor’s point of view, too, it is important to assess the default risk, including all aspects that are relevant for the classification of the probability of default. This also includes the assessment of the actions of politicians.

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Clear Rating Target Defined


Samhällsbyggnadsbolaget i Norden AB (publ) (“SBB”) has entered into a binding agreement to divest eight non-strategic properties with commercial tenants for approximately SEK 400m. This exceeds the latest external valuations (as of 30 September 2021) by 60 percent.

“We are selling the properties considerably above our most recent quarterly valuation and will use the proceeds to further strengthen our balance sheet with the aim of achieving a BBB+ rating,” says Oscar Lekander, Head of Business Development, Samhällsbyggnadsbolaget i Norden AB.

The company currently reports on its ratings as follows:

S&P Global Ratings

Long-term RatingDateOutlook
BBB-March 1, 2021Positive
Short-term RatingDateOutlook
A-3 November 30, 2020

Fitch Ratings

Long-term RatingDateOutlook
BBB-November 25, 2020Positive
Short-term RatingDateOutlook
F3November 25, 2020

Micro And Macro Location Rating Tools Managed By New CEO


Heike Gündling will take up the position as the new CEO at the Berlin software house 21st Real Estate on November 1, 2021. Gündling has many years of expertise in the real estate industry and digitization. Most recently she was Managing Director Real Estate at the global data specialist Eucon. She held previous positions as COO of the Berlin PropTech Architrave and the asset and property manager Bilfinger Real Estate as well as a long-standing member of the management team at Corpus Sireo.

“With Heike Gündling we have been able to win a proven digitization expert for 21st Real Estate and are convinced that she will successfully develop 21st Real Estate in her role as CEO”, says Antoinette Hiebeler-Hasner, Chairwoman of the Advisory Board at 21st Real Estate. “In addition to her real estate business background, we benefit in particular from her experience in the areas of digital processes and products based on artificial intelligence. This combined know-how is the ideal prerequisite for the further development and future success of 21st Real Estate. “

Sascha Klaus, CEO of 21st investor Berlin Hyp AG, comments: “Alongside climate change, digital transformation is one of the greatest challenges of our time. As Berlin Hyp, we want to actively shape this change and, in the process, fundamentally optimize our valuation process. 21st Real Estate provides us with valuable comparative rents as well as infrastructural and socio-demographic data for every micro-location. In addition, the tool from 21st Real Estate offers the possibility of calibrating micro and macro location ratings. This brings noticeable time savings with simultaneous data security for object assessment. We wish Heike Gündling every success and look forward to working with her. “

Moody’s Extends Pole Position With Bogard


Moody’s Corporation has acquired Bogard AB, a leading provider of data and information on politically exposed persons (PEPs) in the Nordic region. The acquisition advances Moody’s ability to help customers perform Know Your Customer (KYC) screening and research to address financial crime.

Bogard covers over 17,000 PEPs, relatives, and close associates across Sweden, Norway, Denmark, and Finland. The company collects, refines, and updates its data using various sources, including tax authorities, business and real estate registries, and other directories in the Nordic region.

The EU’s Fourth Money Laundering Directive entails an extension of the PEP concept, which now also covers domestic PEPs. This means that more resources are used for the activities affected by the law and that the importance of an efficient KYC process increases. With the help of Bogard’s practical experience of AML, Bogard has developed services that help customers in the Nordic market to easily and smoothly meet the requirements for PEP identification.

“Access to accurate, up-to-date information on politically exposed persons is vital for banks, corporations, and other market participants seeking to prevent money laundering and other forms of corruption,” said Keith Berry, General Manager of Moody’s KYC business unit. “Bogard’s sophisticated technology and local expertise further expands Moody’s integrated risk assessment capabilities to address financial crime, and deepens our presence in the region.”

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Rating Oligopoly Persists


“The EU requirements for providers of credit ratings have not broken the dominance of the three big agencies S&P, Moody’s and Fitch”, says a story published in Germany’s only stock exchange daily, Börsen-Zeitung. in Frankfurt on October 28, 2021. The author, Detlef Fechtner, reports on a speech deliverd by Steffen Kern, Chief Economist and Head of Risk Analysis at the EU’s financial market regulatory and supervisory authority ESMA, in Paris (France).

According to his presentation, the EU requirements for providers of credit ratings have not broken the dominance of the three big agencies S&P Global Ratings, Moody’s Investors Service and Fitch Ratings. “Hardly anything has changed in the past five years,” reported Steffen Kern on the occasion of the symposium of the Center for Financial Studies and the Institute for Banking and Financial History in cooperation with Moody’s. As Kern emphasized, “a more even distribution of market shares would be desirable”.

Kern recalled that the market share of the Big 3 – the two heavyweights S&P and Moody’s as well as number 3 Fitch by far – was 92% six years ago and is now 91%. The figures show that the many small rating agencies fail to put competitive pressure on the trio – despite regulatory support. The EU regulation from 2013 stipulates that issuers who have at least two ratings created should “consider” commissioning a small agency.

His findings show that there are apparently no market forces that would cause the leading agencies to be replaced. The often invoked “failure” of these rating agencies during the financial crisis did not lastingly break the trust in their judgments.

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Bureau Veritas Helps To Find More Truth About ESG

Products, Raters

Bureau Veritas has an interesting and promising position to support companies on their way to more sustainability. Bureau Veritas helps companies, governments and public authorities reduce their risks in terms of health, quality, safety, environmental protection and social responsibility. Those challenges are central to societal aspirations.

Bureau Veritas is a world leader in laboratory testing, inspection and certification services. Created in 1828, the Group has close to 78,000 employees located in more than 1,600 offices and laboratories around the globe. Bureau Veritas helps its 400,000 clients improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility. Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index.

In addition to the actions deployed in its own operations, through its BV Green Line of services and solutions, Bureau Veritas is empowering organizations – both private and public – to implement, measure and achieve their sustainability objectives. The BV Green Line scope of expertise covers ESG topics in 5 specific areas:

  • Resources & Production;
  • Consumption & Traceability;
  • Buildings & Infrastructure;
  • New mobility;
  • Social, Ethics & Governance.

Being a Business to Business to Society company comes with a duty: to be exemplary in terms of sustainability internally, and to be a role model for industry in terms of positive impact on people and the planet.

The group’s commitment is to act responsibly in order to “Shape a Better World”.

This commitment was again recognized by several non-financial rating agencies during the third quarter. This is a testament to Bureau Veritas constant efforts regarding sustainability. Since September 17, 2021, Bureau Veritas joined the Euronext CAC 40 ESG Index, which identifies the 40 companies that demonstrate the best Environmental, Social and Governance (ESG) practices.

The non-financial ratings updated during the third quarter are as follows:

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Amongst other non-financial ratings of the Group: MSCI AA rating; CDP B rating, and Gold Class and Industry Mover membership in the S&P Global – Dow Jones Sustainability Indices (DJSI) 2021 Sustainability Yearbook.

S&P Global Ratings’ Revenue Increased 14%


S&P Global reported third quarter 2021 results with revenue of more than $ 2 billion, an increase of 13% compared to the same period last year.

  • Every segment was delivering revenue growth.
  • Net income increased 75% to $797 million.
  • Diluted earnings per share increased 75% to $3.30 primarily due to the debt tender premium and fees associated with the senior notes tender offer in the prior period.
  • Adjusted net income increased 24% to $855 million.
  • Adjusted diluted earnings per share increased 24% to $3.54 primarily due to very strong revenue growth.
  • The largest adjustments in the third quarter of 2021 were for costs related to the pending merger with IHS Markit and deal-related amortization related to previous acquisitions.

“The strong global economic growth, elevated M&A activity, strong stock markets, and increased volatility realized in the third quarter created a solid underpinning for our businesses. In this environment, S&P Global delivered an exceptional quarter of financial results as we continue to provide our customers with the essential intelligence they need to navigate rapidly changing markets,” said Douglas L. Peterson, President and Chief Executive Officer of S&P Global. “After delivering very strong results in a difficult 2020, we expect to meaningfully surpass those results in 2021.”

S&P Global continues to make progress on the merger with IHS Markit as the regulatory path to closing is becoming clearer:

  • The UK and European regulators have now announced their views on the transaction.
  • S&P Global and IHS Markit have committed to divest S&P Global’s CUSIP Global Services and Leveraged Commentary and Data, together with a related family of leveraged loan indices, as well as IHS Markit’s Oil Price Information Services (OPIS), Coal, Metals & Mining (CMM), PetroChem Wire, and Base Chemicals businesses.
  • Based on the regulatory feedback and these divestitures, the management now anticipates closing during the first quarter of 2022.

The Company’s operating profit margin increased 80 basis points to 51.9% due to higher incremental profits on additional revenue partially offset by merger-related costs. Adjusted operating profit margin increased 250 basis points to 55.4% primarily due to higher incremental profits on additional revenue.

During the third quarter, the Company returned $186 million to shareholders in dividends. There were no share repurchases during the quarter due to the pending merger with IHS Markit.

S&P Dow Jones Indices LLC

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S&P Global Ratings

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S&P Global Market Intelligence

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S&P Global Platts

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ECB Sidelines Private Investors


In a research piece titled “Covered bonds at a turning point?” published by Scope Ratings the dominate role of the European Central Bank (ECB) for credit rating agencies becomes once more very obvious.

“The covered bond market is in upbeat mode. But while issuance has picked up significantly, public supply will remain well below the EUR 100bn mark of previous years”, says the report. The grim news for the relevance of the rating agencies for private investors lies in the following insight of Scope Ratings’ analysts: “Private investors remain sidelined as the market remains firmly in the grip of the ECB.”

The economies of scale of a rating agency come into full effect for investors when a large number of investors are confronted with a large number of issuers. In this case, the rating agency bundles analytical competencies in such a way that it makes the results of its research accessible through independent and easily understandable rating symbols. In a market full of investors and issuers, the rating agency acts as a true agent between these two sides of the market and helps to get to know each other better.

However, if the purchase of securities was mainly carried out by the central bank, it is crucial for the development of the rating agency to be recognized by the central bank. This is exactly where the problem is with all the rating agencies that are domiciled in Europe with their headquarters, because none of the European rating agencies has so far achieved the status of being recognized by the European Central Bank. Only the ratings of American agencies are relevant for the decisions of the European Central Bank.

Every rating agency operating in Europe must be registered or certified by the European Securities and Markets Authority (ESMA), according to the EU regulation on credit rating agencies. Only those who meet a large number of qualitative and quantitative requirements can afford an application for recognition. However, this effort does not guarantee recognition by the ECB.

But what are the factors behind the development of the covered bond market in Europe? “The key factor behind the increase has been the pickup of inflation,” said Karlo Fuchs, head of covered bonds at Scope. “Changes in the yield curve mean that positive-yielding covered bonds are again possible for tenors above seven to eight years. A year ago, investors had to buy long-dated maturities and significantly increase credit risk to get positive-yielding covered bonds.”

Fuchs notes that while EUR 28.3bn of new issuance since September is positive, it remains the tip of the iceberg. “As in previous years, publicly placed covered bonds will remain net negative this year so volumes need to be taken into the context of total market activity,” he said.

The ECB now holds more than 45% of covered bond benchmarks; more than EUR 710bn throughout all monetary operations. As such, changes to monetary policy can have significant repercussions on market activity. From a credit quality perspective, the most important impact will come from the orderly transition of retained covered bonds.

Asset and liabilty matching remains the most decisive factor for the risk profile and credit quality of covered bonds. We hope that the market’s largest investor is using its influence to encourage issuers to provide additional information on the share of retained covered bonds and the way and pace in which issuers are managing them to avoid a deterioration in programmes’ credit quality,” Fuchs said.

Although the term “covered bond” has established itself in the market and covered bonds are seen by investors as a separate asset class, the term conceals a large number of different securitisations. Therefore, the services of an independent rating agency are valuable to understand the differences between the instruments and, in particular, to recognize differences in creditworthiness. Covered bond harmonisation remains theoretical, as only five countries met the 8 July 2021 deadline.

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Little Risk Of Systemic Contagion From The Evergrande Crisis


“China’s ghost cities” have become a familiar trope in Western media. Beyond Kangbashi, with its other-worldly stadiums and museums, there is Chengchong in southern Yunnan province; Binhai, outside the central city of Tianjin; and Tianducheng, in the Hangzhou suburbs, with its very own replica of the Eiffel Tower.

China’s ghost cities are in the news again because of the financial travails of Evergrande Group, China’s second-largest property developer which, teetering on the brink of default with outstanding debts of more than $305 billion. What effects the crisis can have and how German developers compare requires further analysis. Therefore, in the following some insights into this.

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Olaf Scholz Did Not Care To Visit FIU


The raid on the German Ministry of Finance was the subject of a special meeting of the Bundestag Finance Committee this week.

The background to the search are investigations into employees of the Financial Intelligence Unit (FIU), who are said to have failed to forward information on terrorist financing to the judiciary and the police in good time.

The FIU is assigned to the Ministry of Finance. The statement by Federal Finance Minister and SPD candidate for Chancellor Olaf Scholz that he had never been to the FIU in Cologne caused a surprise.

According to State Secretary for Finance Wolfgang Schmidt, the Federal Ministry of Finance has no specialist supervision over the FIU, but only legal supervision. According to a report by WirtschaftsWoche, there is also a different assessment of this. Schmidt’s statement applies to operational business, but the ministry also has specialist supervision in strategic issues.

“The myth that the BMF has no technical supervision over the FIU has been refuted,” said FDP financial expert Frank Schäffler to WirtschaftsWoche. “Olaf Scholz is responsible for the organizational deficiencies of the FIU.”

A German Real Estate Price Affordability Index


A new study shows the most expensive and cheapest neighborhoods in Germany. It contains an evaluation of the current real estate prices, the minimum income that is necessary to avoid financial overload due to housing costs. The study shows an overview of the median income in the respective city as well as an exemplary calculation. The calculation shows how many years an average earner needs to pay off a property in the respective city.

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Rating Agency Violates Disclosure Of Transparency Reports And More

Agencies, Authorities, Compliances, Registrations, Regulations

CRA Transparency Reports 2021

“Transparency Reports” of credit rating agencies (CRAs) are published in accordance with Article 12 and Annex I, Section E.III of the EU Regulation on Credit Rating Agencies:

  • (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, as amended by Regulation
  • (EU) No 513/2011 of the European Parliament and of the Council of 11 May 2011 and as amended by Regulation
  • (EU) No. 462/2013 of the European Parliament and of the Council of 21 May, 2013.

Rating agencies are therefore obliged to disclose their transparency reports in order to enable everyone to obtain certainty about the functioning of the rating agency. Unfortunately, the reports are not always easy to find. Therefore, the following lists can be found with all links to the current reports.

In one case, the report cannot be found by normal search engines, but it is stored in such a way that the supervisory authority, the European Securities and Markets Authority (ESMA) can be shown a link which, however, is normally not found by internet users. The link to the missing report can be found in the following lists.

Missing transparency report

With one of the registered credit rating agency, however, there is a clear violation of the CRA Regulation in the European Union:

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There is a page that lists transparency reports, but all the links are broken and do not allow the alleged transparency reports to be downloaded. It makes no difference whether you search in German or in English. The mandatory reports are not available in neither German nor English. The violation relates not only to the most recent report, but also to previous years and other mandatory reports of the same credit rating agency. The reports, which are so important for investors and issuers, are permanently unavailable. The lack of reports is not due to temporary maintenance.

In this case it is again evident that the European supervisory authority is apparently working too slowly to punish such violations. The deficiency could be remedied by simply uploading the reports. It has been shown that it can sometimes take ESMA several years to punish a violation of the EU regulation on rating agencies. That is too late to allow market participants an up-to-date insight.

Incorrect file name

A leading American rating agency has its transparency reports ready with confusing labels. The “Transparency Report 2020” shows what is actually a transparency report for 2019. The right Transparency Report 2020 is also available, but in a different place and with a different link. This can lead to the erroneous use of this data in statistical evaluations. We have an example of this.

The following documentation proves the incorrect and misleading designations. Here is the wrong link first:

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The following links led to the correct files – with the one exception mentioned above – on Friday, September 17th, 2021:

Sorted alphabetically

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Sorted by country

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Green Light For Greensill Was Legitimate

Governance, Regulations

A Berlin rating agency remains as a scapegoat

Now it is official: In the city of Mohnheim no failure of the administration could be determined before and in the insolvency of Greensill Bank in Bremen. The responsibility is put on the “investment grade” rating, which was issued by a local rating agency in Berlin. In politics, efforts are made to limit the damage. The top German overseer, responsible for the biggest losses since World War II, is running for the Chancellery.

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After The Raid On The Ministry of Finance


SPD candidate for Chancellor Olaf Scholz is under pressure

The “governance” criterion plays an important role in ESG ratings for states. Not only credit ratings are influenced by good governance. Finance ministries have a crucial role in this.

The Osnabrück public prosecutor’s office searched the Federal Ministry of Finance in Germany this week. The Federal Ministry of Justice was also in the sights of the investigators. The background to this is an investigation against those in charge of the Financial Intelligence Unit (FIU), a special unit of customs against money laundering.

As “Spiegel” reports, German weekly news magazine published in Hamburg, there is a suspicion of thwarting punishment in the office. The FIU allegedly failed to properly forward money laundering reports from banks to law enforcement authorities.

“The FIU is a bunch of chaos. Finance Minister Olaf Scholz has not got the business under control in the past four years. That is his responsibility,” said FDP financial expert Frank Schäffler, commenting on the events.

The conditions are alarming and particularly relevant in light of the fact that the Federal Minister of Finance is currently applying for chancellorship in Germany in the federal election campaign.

A Supermarket Portfolio Not So Super

Actions, Reports

A B (Single B) is shown on the Expo rating scale. In his Investmentcheck-News KW 36/2021, Stefan Loipfinger comes to a different conclusion, mainly due to the lack of willingness to provide information.

The Exporo classification measures the relative risk using important criteria that are of great importance when making an investment decision in the real estate sector. Points are awarded for six criteria – the more points, the higher the assessed risk. “It should be noted”, warns Exporo, “that the Exporo class represents a strong simplification of complex relationships and under no circumstances can all the risks that a property or a real estate project entails be considered. Investors should therefore not use the Exporo classification as the basis for their decision.”

“The supermarket portfolio” are securities without sales prospectus (WIB according to §3a WpPG or PRIIP). The capital is passed on to Wohninvest Holding GmbH. The project company 1, the WI Objektgesellschaft 100 GmbH & Co. KG, the project company 2, the WI Objektgesellschaft 82 GmbH, the project company 3, the WI Objektgesellschaft 84 GmbH & Co. KG and the project company 4, the WI Objektgesellschaft 98 GmbH & Co. KG the borrower to the Wohninvest group of companies. The project companies are planning to carry out renovation measures on the respective properties.

Exporo sees a “very experienced developer (Wohninvest Group) with whom Exporo has already successfully financed 12 projects, 6 of which have already been repaid.” Here are more of Exporo’s “keyfacts:

  • The traditional food retailing market is stable and, according to the Retail Real Estate Report, properties with a focus on local supplies are in great demand.
  • Established and strong tenants with constant cash flow who did not suffer any losses during the pandemic.
  • Rents are at market level and the leases are indexed; average lease term is 8 years.
  • Well-maintained condition of the portfolio; Necessary maintenance measures on the objects are factored in.
  • Abstract acknowledgment of debt in the amount of the loan.

In Stefan Loipfinger’s view, the documents provided are not sufficient for a qualified investment decision. In the opinion of Investmentcheck, in addition to the investor information sheet in accordance with Section 13 of the VermAnlG, further documents with the information of a sales prospectus as defined in Section 7 of the VermAnlG should be made available.

Investmentcheck transparency rating:

Rating: 3 out of 5.

Investmentcheck has published the company’s answers: “Thank you for your request. When presenting the existing properties and financing projects on our platform, we attach great importance to transparently providing all information that investors need for their investment decision. This information can be found publicly for each project on the respective detail page on our platform. I would therefore like to ask for your understanding that we cannot answer the standardized inquiries due to the considerable additional work involved ”.

Accordingly, “willingness to provide information” and “placement numbers” did not receive a single star at

ESG Ratings: The Good, the Bad, the Ugly

Agencies, Methodologies

Headline ratings no longer enough

Prof. Dr. Nils Stieglitz gave a welcome address to the conference “ESG Ratings: The Good, the Bad, the Ugly” of the Corporate Governance Institute (Prof. Dr. Julia Redenius-Hövermann) at the Frankfurt School of Finance & Management, followed by Prof. Dr. Zacharias Sautner, showing data of Hartzmark and Sussman, 2019, proving that investors value sustainability. He introduces the subject “ESG Ratings in the Investment Process”.

“Corporate ESG ratings are the most unseful source of information”, says Zacharias Sautner. This is confirmed by various studies. ESG ratings provide data material to investment performance, supplement organization’s other research of corporate ESG performance/risk.

SustainAbility, an ERM Group company, is a think tank and advisory firm that works to inspire and enable business to lead the way to a sustainable economy. In 2010, SustainAbility undertook its first “Rate the Raters” project to better understand the environmental, social, and governance (ESG) ratings landscape and provide perspectives to help companies, investors and other stakeholders make sense of and derive more value from ESG ratings.

In general, investors recognize that ESG ratings and rankings are not going away any time soon. When
asked what changes and solutions they would like to see in the next five years the leading responses
from the survey were the following:

  • Improved quality and disclosure of methodology
  • Greater focus on relevant/material issues
  • Better linkage to company financial performance
  • Greater consistency and comparability across
  • rating methodologies
  • Greater engagement of rated companies in the
  • evaluation process
  • Consolidation of ratings

These expectations were reiterated in the interviews along with a desire for more timely coverage, more data, integration of ESG into financial reporting and the ability to evaluate corporate societal impact vs. just operational performance.

Dr. Florian Berg, Massachusetts Institute of Technology, spoke about the divergence of ESG ratings. Correlations of the varios raters’ ratings range from 38% to 71%. Based on data from six prominent rating agencies namely, KLD (MSCI Stats), Sustainalytics, Vigeo Eiris (Moody’s), RobecoSAM (S&P Global) the divergence into three sources. “We do not even know the truth, therefore we only can compare”, argues Florian Berg. “We describe ESG ratings in three elements.

  • Scope: which attributes are included?
  • Measuremaent: how ar e these attributes measured?
  • Weights: how are indicators aggreagted into one score?

Aggregation and mesurement are the biggest sources of differences. See Aggregate Confusion: The Divergence of ESG Ratings, 2019.

What are the implications for investors? According to Florian Berg, the following two tasks have to be accomplished: Clarify ESG preferences, scope and weights, and investors have to answer the question: What measurement methodology do you agree with most?

Ingo Speich, Head of Sustainability and Corporate Governance, Deka Investment, points to the fact that investors no longer look only at headline ratings, but dig deeply into the data. He outlines the problem that the regulator requires financial service providers to report on ESG criteria. However, the data required for this are not sufficiently reported by the companies concerned, so that the financial service providers are faced with the difficulty of collecting, processing and passing on this data.

Rating Agency Accused of Using Original, Then Rewritten Data

Agencies, Data

Refinitiv ESG’s rewriting not a one-time event

Prof. Dr. Kornelia Fabisik, Assistant Professor of Finance, Frankfurt School, reports on some discoveries at one of the ESG rating agencies at the conference “ESG Ratings: The Good, the Bad, the Ugly” of the Corporate Governance Institute (Prof. Dr. Julia Redenius-Hövermann) at the Frankfurt School of Finance & Management.

Refinitiv ESG is a key Environmental, Social, and Corporate Governance rating provider offering “one of the most comprehensive ESG databases in the industry”, and its ESG scores have been used (or referenced) in more than 1,500 academic articles since 2003. The scores were initially constructed by ASSET4, a company acquired in 2009 by Thomson Reuters, which became Refinitiv in 2018. Refinitiv ESG data are employed by major asset managers, such as BlackRock, to manage ESG-related investment risks.

“We document large rewriting of ESG ratings of Refinitiv ESG.” The same set of firm-year observations downloaded September 2018 and September 2020 provides evidence. For the full sample Kornelia Fabisik observerd a rewriting of 21% on average, 18 % median.

“Rewriting is not a one-time event”, warns Kornelia Fabisik. “Refinitv ESG continues to adjust the data ex-post, unannounced.”

“In April 2020, Refnitiv ESG changed the methodology used to determine the ratings.” There were two key changes: Treatment of boolean metrics and introduction of a propietary materiality matrix.

The ESG score deviations are related to firm characteristics, especially past stock returns. Firms that performed better in the past experienced rating upgrades. The ESG score deviations strongly affect the classification of firms into different ESG quantities.

“Has data rewriting stopped post methodology change? No,” ist the answer of Kornelia Fabisik, “the database changes on a weekly basis.” She shows concrete examples.

“ESG ratings industry follows an investor-pay model, whereby the data vendors compete on how useful their ratings are for ESG investments.”

“44% of carbon emission obsesrvations (Scope 1 CO2 emissions) have in some way been altered.” Specifically, 23.6% firm-years were added (i.e., data were missing in the 11/2019 download, but filled in for the 02/2021 download), 1.6% were deleted, and 18.4% were modified. The data rewriting affects all years and not just those closest to the end of the sample period.”

Prof. Dr. Kornelia Fabisik’s conclusions, as presented at the Frankfurt School conference:

  • The large differences in results that we document have implications for empirical test strategies using Refinitiv ESG data. Moving forward, researchers and investment professionals need to verify whether the original or rewritten ESG scores are needed to perform their tests.
  • For example, if the practitioners are unaware of the changes, asset managers could erroneously be benchmarked against the rewritten data that were unavailable at the time of portfolio formation (look-ahead bias).
  • She argues that the results reflect the incentive of the data provider to introduce a positive relationship between ESG scores and returns in the data, in order to demonstrate that their ESG scores are useful for data users developing ESG-related investing strategies.
  • Given that ESG research and ESG-related investment strategies are likely to grow even furhter, this is an important caveat for adhering to the status-quo.

Finance Working Paper N° 708/2020, August 2021, Abstract:

The explosion in ESG research has led to a strong reliance on ESG rating providers. The article documents widespread changes to the historical ratings of a key rating provider, Refinitiv ESG (formerly ASSET4). Depending on whether the original or rewritten data are used, ESG-based classifications of firms into ESG quantiles and tests that relate ESG scores to returns change. While there is a positive link between ESG scores and firms’ stock market performance in the rewritten data, the authors fail to observe such a relationship in the initial data. The ESG data rewriting is an ongoing rather than a one-off phenomenon.

ACRA partners with EDB and Armenia

Agencies, Authorities

Challenge of maintaining independence

The Analytical Credit Rating Agency, Eurasian Development Bank (EDB), and the Ministry of Finance of the Republic of Armenia have entered into a Memorandum of Understanding that establishes areas for cooperation between the aforementioned parties, the key goal of which is to stimulate economic growth in the Republic of Armenia and the Russian Federation. The document was signed by Minister of Finance of the Republic of Armenia Tigran Khachatryan, Chairman of the Management Board of EDB Nikolai Podguzov, and ACRA CEO Mikhail Sukhov.

The Memorandum, among other things, provides for the creation of conditions for assigning a sovereign credit rating to the Republic of Armenia, increasing the availability of rating services, and expanding the rating coverage of companies that are residents of the Armenian financial market. In addition, in accordance with the Memorandum, ACRA will assign ratings to bonds issued by Armenian issuers within the framework of projects involving the EDB. A separate area of partnership will be cooperation in the field of sustainable development in the Republic of Armenia, including through the use of green finance instruments.

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The obligation to register for rating agencies, which has now been implemented in almost all parts of the world, especially in Europe, America and Asia, has sparked an academic discussion as to whether a registration obligation already hijacks dependency relationships that could influence the independence and neutrality of the rating agency in its ratings. Through close partnership relationships, the rating agency becomes a virtual external department of ministries or banks. If the partnership is abandoned, this may have consequences for the rating agency, which could pose an existential threat to the agency.

“Using money from our Technical Assistance Fund, the EDB intends to allocate a grant on an irrevocable basis, at the expense of which ACRA will carry out actions to assign a sovereign rating to the Ministry of Finance of the Republic of Armenia. This will encourage the development of ties within the Eurasian Economic Union and with other EAEU member states and pave the way for providing rating services to companies that are residents of the Republic of Armenia and have an interest in entering the Russian financial market,” commented Chairman of the Management Board of EDB Nikolai Podguzov.

“Credit ratings are an integral part of the market economy and help ensure the formation of a stable financial market with a broad base of investors. Our cooperation with the Ministry of Finance of the Republic of Armenia and the EDB will contribute to unlocking investment potential and the expansion of trade and economic ties within the EAEU,” commented ACRA CEO Mikhail Sukhov.

No Risk-Free Deposit World In This World


Dr. Tamaz Georgadze comments in the renowned “Börsen-Zeitung” on the “Causa Greensill

Deposit platforms such as the German “WeltSparen” and “Zinspilot” are among the most important innovations in banking: Customers get more choice and can benefit from higher interest rates from other banks. Deposit-taking banks efficiently diversify the sources of their customer liquidity, which contributes significantly to the fulfillment of regulatory requirements and the stability of the financial market. House banks, in turn, can deduct deposits from their balance sheet by brokering third-party products via the platforms, effectively reducing their negative interest burden at the European Central Bank (ECB) and at the same time strengthening their customer offerings. In this way, deposit platforms help create a more resilient and customer-friendly financial system. With this argument, Dr. Tamaz Georgadze introduces the topic of his comment in the Börsen-Zeitung on September 2, 2021.

Around 400 financial institutions in Europe are cooperating with Raisin DS that recently emerged from the merger of Deposit Solutions and Raisin. These include well-known institutions such as Deutsche Bank or Commerzbank, the largest savings banks and cooperative banks, established foreign financial service providers such as Aviva, Investec or Crédit Agricole Consumer Finance, and neobanks such as N26.

“However,” writes Dr. Tamaz Georgadze, “the wider public may have recently become aware of the deposit platforms through another issue. One of the 400 partners, Greensill Bank AG, based in Bremen, had to file for bankruptcy in March 2021 – an unfortunate event for all market participants, especially the municipalities, whose deposits at the bank were not secured. Since then, the discussion has been simmering about who is responsible. How did the bank’s good rating come about?”

Following the scandal, the role of deposit platforms was also discussed, reports Dr. Tamaz Georgadze, and focuses on three questions.

  • First: Does the compensation of customers who have deposited money with Greensill Bank via deposit platforms put a burden on the deposit protection fund of the banks or even on the taxpayer?

The average amount that customers invested with the bank via platforms was around 40,000 euros, well below the limit of the statutory deposit protection and thus fell within the scope of the Compensation Scheme of German Banks (EdB). “This deposit protection fund is filled by the banks, tax money is not involved”, says Dr. Tamaz Georgadze.

As his information shows, practically all deposits fall – on average – under the deposit insurance, so that the risks are usually socialized. But on a platform like this in particular, risk is the decisive factor that can make all the difference. If there is no difference in risk, the investor’s selection process no longer makes sense. The rational investor puts his money where he can expect the highest return. But it is precisely the more or less well-known names that may induce savers in doubt to invest their money in the bank that they have heard of before and that they trust.

“Once your Raisin Account is open, you will be able to choose savings accounts from all over Europe. All the important information you’ll need to know, such as the bank, interest rates or length term, are set out clearly so you can make easy comparisons.” So it says on their website However, once all the risks have been leveled, this selection process no longer makes any sense and is, in economic terms, a waste of the investor’s valuable time. A machine that finds the highest interest rate and the appropriate time period is easier to construct.

“When you’ve chosen the savings account that’s right for you, let us know by logging in to your Raisin Account and selecting the savings account you want to open. You can apply to open as many accounts as you like.” The platform makes it as easy as possible for investors to open accounts and transfer money.

The investor is offered the experience of a selection process that actually has no economic function, because the most important topic, namely risk, cannot be meaningfully incorporated into his calculation. This leaves him with the more or less irrational choice between different colors and shapes of logos. Clicking on the alternative with the highest interest could be done by a robot.

What about the second question of Dr. Tamaz Georgadze:

  • Second, is it legitimate for savers (and platform operators) to rely on deposit insurance – or should certain market participants be wholly or partially excluded from deposit insurance or be less protected?

“The aim of deposit insurance is to strengthen financial market stability and prevent bank runs. At the same time, it protects customers from risks when using simple savings products that they cannot assess themselves. It is therefore impossible for consumers to carry out a credit risk assessment or even assess the stability of the bank when opening a bank account”, says Dr. Tamaz Georgadze. Here he ignores an important EU-regulated industry, namely that of credit rating agencies. Knowledgeable in reading and writing, investors can be expected to understand the risk classifications given by rating agencies in the form of school grades: AAA, AA, A, BBB, …

“In a deposit insurance case, on the other hand, the principle of equal treatment must apply to all customers, regardless of which channel they used to access the bank’s products. In view of the increasing variety of access channels – branches, direct portals, comparison websites, interest rate platforms and many more – it would not be reasonable to expect consumers to judge for themselves at any time whether they are using a fully or partially protected channel when using identical banking products”, says Dr. Tamaz Georgadze.

  • Third: Would the platform operator have had to recognize the problems of Greensill Bank and have had to actively exclude the bank from brokering deposits before the financial supervisory authority BaFin passed the payment moratorium?

“To do this,” says Dr. Tamaz Georgadze, “one has to consider the different roles of the market participants. In the case of bank deposits, the sole authorization and monitoring function rightly rests with the banking supervisory authority and, to a lesser extent, with the auditing association, which has the tools and information necessary to carry out this task. No private company should decide and judge which regulated financial institution should get better access to customers after admission to the deposit business and which should not.”

Platforms that provide consumers with an apparent choice of identical banking products have hardly any beneficial economic functions. From an economic point of view, the most efficient allocation of the resource “capital” is important. In a market economy, the preferences of market participants are reflected in the prices they are willing to pay or are willing to accept. With every lending of money, it comes down to the risk, because after all it is about the uncertain future for all people. However, consumers cannot be expected to form their own creditworthiness assessments about hundreds of banks. But the work that cannot be relieved of the saver is to reflect on one’s own willingness to take risks and to take this into account when making decisions.

The willingness of investors to take risks has been shown to vary. That is why there are methods and approaches for risk profiling of investors which make it possible to analyze the risk-bearing capacity and willingness to take risks according to scientific methods. These methods exist and need not be invented. As the statistical basis grows, a steady improvement in the approaches to risk profiling can also be expected.

There are also credit rating agencies that are under the supervision of the European Securities and Markets Authority (ESMA). The more than a century during success story of the rating agencies is based precisely on the fact that symbols that are understandable for everyone express the different levels of risk. It is therefore reasonable for investors to make their decisions on the basis of such ratings if they want to achieve particular advantages over their deposits at their account-holding bank on interest-rate platforms.

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The world’s savings cannot be faced by a world deposits insurance. It is up to the interest platforms themselves to live up to their self-chosen brand names such as “WeltSparen“. There is no such thing as a risk-free world of deposits in this world.

Billion Dollar Brand Name Given Away

Advertising, Agencies, Consulting, Histories

Rework requested

Just a few years ago, a cereal was linguistically associated with Kellogg’s. Anyone who spoke of Kellogg’s in Germany thought of cornflakes and vice versa, anyone who thought of cornflakes would also think of Kellogg’s.

In the meantime, discount chains – from Germany for example – such as Aldi and Lidl have revolutionized the world of brands. Lidl in particular attacked the big brand names directly in a spectacular advertising campaign. In 2016, Lidl began to directly compare famous branded products with its own brands and explicitly give the customer the choice of choosing the more expensive branded product or a much cheaper comparable product. The customers have made the choice, some branded products are still around today, others have completely disappeared from the shelves.

Perhaps unnoticed by many, a brand name that had been known for decades in almost every American household and even worldwide – at least among bond issuers and professional investors – disappeared. The curious thing about this story is that the brand is still being talked about even though it no longer exists. Anyone looking for this company has to use an intelligent search engine that remembers the story and therefore directs to the right page. If you search under the old name among the official registrations, you will no longer find what you are looking for. The valuable brand name appears in a footnote at best.

For the company of a rating agency, the most valuable thing is its history. The ability to correctly forecast the solvency of companies and other bond issuers can only be demonstrated over a long period of time. Trust in a rating agency develops very slowly; in the case of the leading agencies, it developed over a century. Trust in the rating agency is inextricably linked to its name. Analysts and computer models can also be quickly bought by other agencies and put on the greenfield. However, the history and corporate culture of a credit rating agency cannot simply be reproduced and is therefore a valuable asset.

For supervisory authorities such as the European Securities and Markets Authority (ESMA) as well as for the European Central Bank (ECB), the history of a rating agency is of decisive importance for the recognition, be it as a registered or a certified credit rating agency. Renaming in the agency does not play a role for the purely legal recognition. However, expectations of market participants and users of credit ratings are associated with the age of the name.

If a rating agency abandons its name, it can continue to protect the abandoned trademark if necessary. From a purely legal point of view, the old brand name may still be protected, but economically it has been given away.

2016 was also a memorable year for the US rating agency Standard & Poor’s

Standard & Poor’s Corporation was an internationally known credit rating agency. It was created in 1941 from the merger of the American companies H.V. & H.W. Poor Co. and Standard Statistics Bureau. As an abbreviation, S&P quickly caught on. Until the 1970s, the agency’s business activities could be compared to a publishing house rather than to the research and credit departments of banks.

In the 1990s, almost all of the agency’s products were also offered on paper and not primarily electronically. A parent company like McGraw-Hill, which is itself a publishing group, fits such a “publishing company”. McGraw-Hill was an American publisher founded in 1909 and based in New York City, known for textbooks and school books and financial information services.

In 1959 they had sales of $ 100 million. In 1961 they took over F. W. Dodge Corporation (which had its focus on the construction industry) and in 1963 the Webster Publishing Company, with which they entered the market for textbooks for elementary schools and high schools, which they expanded in 1965 with the takeover of the California Test Bureau. With the takeover of Shepherd’s Citations in 1966, they moved into the field of legal books and with the takeover of Standard & Poor’s in the same year in the field of financial information services. In 2011 it was split into S&P Global and McGraw-Hill Education (taken over by Apollo Global Management in 2012).

5 years after the break-up of the group, the famous brand name finally came to an end. S&P Global had hired a global brand transformation company to develop a unified branding strategy: Landor, founded in 1941 by Walter Landor, who pioneered some research, design, and consulting methods that the branding industry still uses. Landor has also advised Coca-Cola and Kellogs.

Landor belongs to the WPP group of companies: WPP plc is a British multinational communications, advertising, public relations, technology, and commerce holding company headquartered in London, England. WPP’s brand consultancies Landor and FITCH have now grouped under one entity named “Landor & FITCH”. Since January 2019, FITCH has been part of the Landor family under new stewardship. FITCH should not be confused with rating agency Fitch Ratings.

While the consultancy itself kept its 1940s name, they recommended Standard & Poor’s to abandon the 1940s name. Landor was founded 1941, Standard & Poor’s formed in 1941. In 2016, the year in which the discounters started their massive attacks on the established brand names, the brand name Standard & Poor’s was abandoned, while Landor continued to use his famous name. The renaming took place at a time when the defense of brand names was particularly important.

The addition “global” is particularly old-fashioned and out of date: As early as the turn of the millennium, the internet economy made it clear that practically every company can claim to be globally active. Even the information that is held by the smallest companies is accessed worldwide, as the example of RATING EVIDENCE GmbH from Frankfurt am Main, Germany, shows. The map traces the countries from which the website was able to record visitors (as of September 4, 2021):

As the following retrieval from September 4, 2021 shows, the name “Standard & Poor’s” can no longer be found on the agency’s website itself in all documents since 2016. If you search for the old company name, you will find documents from 2015 or older:

The famous name of the rating agency is no longer written out anywhere. If the old documents are deleted one day, the name will even disappear entirely from their own website. Anyone looking for the name “Standard & Poor’s” will one day no longer find what they are looking for at the agency.

Although the internet has grown exponentially in the last 5 years and the number of information offers and bloggers has increased significantly, there are still many more sites that speak of “Standard & Poor’s” and not of “S&P Global Ratings”.

An estimate of how many pages the term “S&P Global Ratings” is used on can be determined using the Google search engine. In terms of search results, it must be taken into account that tens of thousands of pages have already been published by the rating agency itself and may be part of these search results.

Despite the dramatic growth of the Internet in the last few years, there are still more pages quoting “Standard & Poor’s” than “S&P Global Ratings”. Anyone who thinks that these are just old pages that have not yet been updated can be convinced of the opposite:

The agency is also still listed under its old name in the popular Internet reference works:

Google Scholar provides a simple way to broadly search for scholarly literature. Search across a wide variety of disciplines and sources: articles, theses, books and so on. Students and scientists from all over the world use this database. Here, too, it becomes very clear how the attempt to establish the new brand name has failed:

Standard & Poor’s is one of the few companies that has made a name for itself in school textbooks. Anyone who studies investment and finance at one of the business schools will sooner or later hear from the credit rating agencies and, among them, in particular from the two market leaders Moody’s Investors Service and Standard & Poor’s. In the United States, the CFA Institute is one of the most important educational institutions beyond the business schools. The CFA Institute plays a role similar to that of the German Association for Financial Analysis and Asset Management in Germany. The CFA Institute is a leading organization for the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. There can hardly be a greater honor for a rating agency than being a name that is part of the examination knowledge for professionals, the knowledge relevant to the exam for professional competence.

Even this important institution did not get the name change. All documents on the website can only be found under the old name “Standard & Poor’s”, but not under the new name “S&P Global Ratings”:

All of this leads to a sober balance: the rebranding has not been successful in the last 5 years. As has already been shown earlier, there is no mention of the new name even in specialist circles. For companies like Apple or Coca-Cola it is clear that the brand name is a valuable part of the company.

Who would think of renaming Coca-Cola to “CC Global Drink”?

The following world map of “Google Trends” shows in which countries Standard and Poor’s was searched for for the last 12 months up to September 4, 2021. Such a map can only be displayed on Google Trends if a sufficiently high number of search queries have been registered. The world map speaks a clear language, because it shows that many Internet users still make the effort to type in the long company name “Standard & Poor’s” into the search engine in order to find the rating agency. Judging by the number of search queries, the renaming does not seem to have arrived in these countries in particular: Germany, Sweden, Portugal, Switzerland, and United Kingdom.

A famous and traditional brand name became a senseless combination of letters and words. If the name “Standard & Poor’s” is no longer used anywhere and is not cultivated as a brand, it is completely forgotten where the name came from. With the renaming without history, the memories of the story also end. In this credit rating business in particular, it is all about showing off many years of experience and expertise.

The credit rating agencies have gone through many ups and downs over the decades of their activity. In the dot-com bubble, promises made by companies that promised new markets and “a new economy” were lightly believed. In the global financial crises, rating agencies were blamed for overly optimistic ratings. All of these events left deep wounds that have long healed. Hence there is no need to give up a good name for a “letter salad”.

With the keywords: “Would you like your ratings poor, standard or OK?Willem Okkerse went on business trips about the risks of AEX listed companies. Even these puns by the deceased rating expert could do no harm in the brand name.

The rating agency “Standard & Poor’s” had demonstrated that it could learn from mistakes and draw conclusions. The undesirable developments were cracked down on. The rating agencies were subjected to even stricter regulation in the USA and comprehensive legal control in Europe. Laws have also been passed in Africa and Asia which give rating agencies a special status in many countries.

The services of a rating agency are not like an app from an “AppStore” that was only invented a few years ago, in 2007. In the dynamic environment of apps and webs, name changes may correspond to changed user needs in quick succession. The strength of the leading agencies lies in the fact that they have used comparable rating symbols and scales for decades, which promise comparability and continuity. The renaming of the agency did not reflect the nature of the agency’s activities.

Four businesses unite as one financial powerhouse“: The renaming appears to follow from a disregard for the meaning of names. A name always stands for visions and demands on the future. If you chop up the name beyond recognition, you also violate the identity of the company. The names “S&P Global Market Intelligence”, “S&P Global Ratings”, “S&P Dow Jones Indices” and “S&P Global Platts” suggest a comparability of the diverse activities, which is not given in reality. On the one hand there are companies that provide factual market information, on the other hand there is a rating agency that draws up analysts’ opinions.

Again questions arise about the brand names

Recent corporate development events raise the question of how the corporate group’s branding should be structured. The experiences from the unsuccessful relaunch of 2016 must be taken into account. Brand names alone can be worth billions. To destroy a brand name means to destroy value for the owners. The owners of the brand names do not sit in the consulting firms, but in the general meetings of the shareholders.

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Standard & Poor’s. But “S&P Global Ratings”, Who?

Advertising, Agencies, Marketing

Standard & Poor’s gave away a strong name

“Landor announced that it has provided brand strategy and design services to McGraw Hill Financial for the company’s bold new brand identity as S&P Global. Landor partnered with the company to create a new name and design system that confidently marks S&P Global as the leader in delivering essential intelligence to companies, governments, and individuals.” The press release of May 3, 2016 introduced the text about the rebranding. What about the acceptance of the new brand name five years later?

Despite owning Standard & Poor’s, the S&P 500, the Dow Jones Index, and Platts – some of the most iconic benchmarks and market intelligence brands in the world – McGraw Hill Financial (MHFI) was commonly perceived as a textbook publisher. With a clearly established business strategy, Landor helped MHFI “define its true value and claim its unique position in the market. As S&P Global, the brand tells a new story and opens an auspicious chapter in its impressive history.”

Founded by Walter Landor in 1941 and today a global leader in brand consulting and design, Landor helps clients create agile brands that thrive in today’s dynamic, disruptive marketplace. Their work shall enable top brands—from Barclays to BMW and Tide to Taj – “to stand for something while never standing still”.

Benchmarks and essential intelligence form the backbone of the financial ecosystem, with credit ratings and indices constantly referenced to bring context and clarity to investment decisions. Landor focused the new brand on the pivotal role S&P Global plays as the common denominator in the world of finance, providing this essential intelligence to investors.

There was a sophisticated argument behind the renaming of the group of companies. In practice, however, the new company name is still a long way from establishing itself. For the credit rating agency in particular, S&P is still struggling globally to enforce the new name, even though it is actually to be used in a legally binding manner. The rating agency is regulated in many jurisdictions around the globe.

Ratings and rating agencies are quoted by many issuers and named on their websites. Here are some examples of how the agency’s new name is still ignored after half a decade (access to all of the websites below from September 3, 2021):



Deutsche Lufthansa

Fnac Darty 


Merck KGaA






The selection of these issuers was purely random, regarding the question of how S&P Global Ratings is presented. In the sample, none of the issuers gave correct information about the agencies by which they were assessed. All of them used the old name and not the new brand identity developed by Landor.

The European issuers would actually be obliged to name the credit rating agency correctly, as the rating agency is subject to regulation by the European Securities and Markets Authority (ESMA). The correct name of the European subsidiary of the US rating agency is not “Standard & Poor’s”, but “S&P Global Ratings Europe Limited“.

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Moody’s Work With Revenue Grid

Advertising, Agencies, Procedures, Technology

Revenue Grid, a Mountainview, California-based revenue platform, raised $20 million in Series A funding. “800,000 sales pros use Revenue Grid to win faster and with more confidence”, says the website. The company is proud to have Moody’s as a customer.

W3 Capital led the round and was joined by investors including ICU Ventures. W3 Capital is a family owned Private Equity investor seeking partnerships with other founder and family owned companies, facilitating ownership transition and enabling management teams to lead their businesses into the future. W3Capital seeks control investments.

Revenue Signals are contextual, actionable notifications that tell a whole sales org what is going well or poorly throughout the whole sales process. These alerts and notifications are called “Signals”, because they are designed to signal the sales team about the next best step they should take now, or about anything that doesn’t go according to plan in the pipeline, process, or performance. They are the driving force behind guided selling because they give sales teams an instrument to remove guesswork, control each point in the sales process, and set a unified sales approach.

Pipeline visibility provides understanding into the actual state of the sales pipeline at any particular moment. For sales leadership, it means being able to track key deals, numbers, and thresholds in real time, and understanding why the situation is the way it is and where to move to get to the numbers a company needs.

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Scoring Models For Occupational Disability Insurance

Advisors, Scores

Increasingly, insurers advertise that they are working with so-called scoring models when calculating premiums for occupational disability insurance.

With the help of additional questions about the specific structure of everyday working life, the insurer should be able to get a more realistic picture of the risk to be insured. Customers and intermediaries should welcome it if a more realistic assessment of the job description leads to a lower premium in many cases.

Sometimes the impression is given that the use of a scoring model would make inquiries about the profession superfluous. “However, this is by no means the case”, warns the insurance specialist of infinma Institut für Finanz-Markt-Analyse GmbH, based in Cologne, Germany.

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Mario Draghi’s Repeated Flashes In The Pan

Analysts, Reports

Largely unnoticed, Italy’s stock market is currently changing from an ugly duckling to a proud swan, or rather to a hidden champion in international comparison. Or is this just a flash in the pan, like the one that the President of the European Central Bank has already kindled for all of Europe?

This change is primarily attributed to Prime Minister Mario Draghi, who launched structural reforms to help re-energize the recently sluggish and stagnant Italian economy. Francesco De Astis, Head of Italian Equity at Eurizon sees a first sign since the EU Commission recently raised its growth forecast for Italy for 2021 from 4.2 percent to 5.0 percent.

“The inauguration of Mario Draghi is a key factor in shaping the future of the country: For Italy it is an opportunity to demonstrate credibility and stability and thus to achieve greater and lasting visibility in the international environment,” says Francesco De Astis. Since 1982, structural economic growth has slowed after every economic setback and has never fully recovered. In addition, the economic divergence within the European Economic and Monetary Union (EMU) has increased since the global financial crisis of 2008, whereby the cumulative gap between Italy and the other EMU countries is now very large.

In order to counteract this, Italy’s Prime Minister Mario Draghi is currently preparing government reforms, which will not least be necessary in order to receive the economic stimulus funds awarded as part of the 200 billion euro “NextGenerationEU” economic stimulus program. These include an anti-corruption campaign and streamlining of public procurement, tax reform, rules for foreign investment, more cybersecurity and streamlining measures for the Italian banking sector.

This has already led to reactions on the Italian stock market, says Francesco De Astis: “Those who closely follow the Italian stock market find that the market is gaining momentum and credibility every day; a credibility that is felt by domestic investors immediately after the new government took office, but recently also by foreign investors,.”

In a number of research papers, the Italian stock market is now seen as a favorite among the major European markets, he said.

Francesco De Astis sees the numerous IPOs – 15 since the beginning of the year – and the recent concentration of share buybacks as another strong signal. “This is a sign that entrepreneurs are again investing in Italy, in the Italian real economy, which promises structural and long-term growth.”

In addition to the banking sector, which has already recovered significantly in recent months, Francesco De Astis believes that “all those sectors which correspond to the main trends of the coming years and which are also the focus of attention when investing the resources of the Next Generation Fund are particularly promising”. He includes, for example, “the circular economy sector, which is likely to play an increasingly important role in the portfolios of institutional investors who are increasingly focusing on ESG issues”. He also favors the new tech sector, with its sub-sectors ranging from cloud computing, 5G, Internet of Things, big data to cybersecurity.

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Note: The picture does not show Mario Draghi.

RATING.REPAIR In The Holiday Month Of August


Who is actually interested in RATING©REPAIR? Only subscribers are known by name. All others remain anonymous.

Nevertheless, we can see how many views RATING©REPAIR has received per country by the day, week, month, and year. This is technically possible today. The above illustration refers to the last 30 days.

If a visitors’ location cannot be determined, their views will not be reflected in this chart. A visitor is counted when a user or browser is seen for the first time in a selected time frame.

The unique weekly visitors can sometimes be less than the sum of daily visitors for the same week. The same goes for unique weekly visitors being less than your total monthly visitors. This occurs when the same visitor appears multiple times during the week or month. Yearly totals are a sum of monthly totals.

The following traffic are not reflected in the stats:

  • Visits collaborators of RATING EVIDENCE GmbH make to our own publicly-available site RATING©REPAIR while logged into our account.
  • Visits from browsers that do not execute javascript or load images.
  • Googlebot and other search engine spiders.
  • Visits to a publicly available site by users that are logged in, and listed as members of the site.

Views of password-protected posts or pages on RATING©REPAIR will be counted in the stats. If they do not successfully enter a password to view the page, they will be sent to a 404 error page and will not see the content that is password-protected.

The picture above shows the stats for 30 days ending August 28, 2021 (summarized).

In August 2021 the website RATING©REPAIR welcomed visitors from the following countries. Most of the visitors came from Germany. The countries are sorted according to the number of visitors:

  • Germany
  • United States
  • Norway
  • United Kingdom
  • Austria
  • France
  • Portugal
  • Italy
  • Switzerland
  • China
  • Sweden
  • Nigeria
  • Netherlands
  • Singapore
  • India
  • Spain
  • Denmark
  • Russia
  • Canada
  • Hong Kong SAR China
  • Ecuador
  • Australia
  • Ireland
  • Greece
  • Finland
  • Brazil
  • Sri Lanka
  • Hungary
  • Israel
  • Thailand
  • South Korea
  • Slovenia
  • Macau SAR China
  • Maldives
  • Venezuela
  • Lithuania
  • Czech Republic
  • Turkey
  • Mexico
  • Bulgaria
  • Romania
  • Philippines
  • United Arab Emirates
  • Belgium
  • Bangladesh
  • El Salvador
  • Angola
  • South Africa
  • Algeria
  • Taiwan
  • Indonesia
  • Uganda
  • Poland
  • New Zealand
  • Serbia
  • Luxembourg
  • Cyprus
  • Iceland
  • Malaysia
  • Morocco

Of course, it cannot be stated whether the visitors were of the nationality of the respective state or whether they have their business or private seat there. For example, the visitors to our website from the Maldives may be holidaymakers who enjoy their vacation on the islands and pass their time by visiting our website RATING©REPAIR. We at RATING EVIDENCE GmbH are then happy to have contributed to their enjoyment and relaxation!

Which Rating Agencies The World Is Looking For In Germany


Some surprising observations

Many Internet users do not bother to memorize the exact domain of a website, but simply enter a clear keyword into the Google search engine in order to be able to simply click on the desired result and visit the desired website. The displayed search results are therefore of great importance for the impression that a user receives from the respective rating agency.

As reported in an earlier post (“The Only Credit Rating Agency Recognized by BaFin“), an agency recognized by the European Securities and Markets Authority (ESMA) uses this function in order to present itself with a unique differentiating feature from all other agencies, namely with recognition by the German Federal Financial Supervisory Authority (BaFin). The catch is that BaFin has not been responsible for overseeing rating agencies for almost a decade, since 2012. Today, BaFin no longer gives its own recognition to rating agencies, which the rating agencies would allow to refer to in their advertising. The key to the rating business is the authorization according to the EU regulation.

Against the background of the ban on advertising with BaFin’s recognitions, the question arises of what significance the search results have in practice. How often could it happen that people are misled due to incorrect information in the search results? How often are rating agencies searched for that give false information?

Since search engines such as Google display their search results depending on the location, it must be taken into account that Google will most likely display rating agencies in the search results that are located in the vicinity or at least in the country of the searcher.

Only the following registered credit rating agencies are based in Germany:

Name of Credit Rating AgencyRegistered
Scope Hamburg GmbH (previously Euler Hermes Rating GmbH)2010
Creditreform Rating AG2011
Scope Ratings GmbH (previously Scope Ratings AG and PSR Rating GmbH)2011
GBB-Rating Gesellschaft für Bonitätsbeurteilung GmbH2011
ASSEKURATA Assekuranz Rating-Agentur GmbH2011
Moody’s Deutschland GmbH2011
Rating-Agentur Expert RA GmbH2015
DBRS Ratings GmbH2018
Source: European Securities and Markets Authority (ESMA), last updated list of May 7, 2021

Further below are the results from Google Trends, shown by snippets of screenshots. The information was accessed on August 27, 2021 on Google Trends. For the assumptions, requirements and interpretation of these results, please refer to their website.

Google Trends provides access to a largely unfiltered sample of actual search requests made to Google. It’s anonymized (no one is personally identified), categorized (determining the topic for a search query) and aggregated (grouped together). This allows Google to display interest in a particular topic from around the globe or down to city-level geography.

Here are a few notes on the study design:

  • The searches here were carried out with the shortest possible search term that unmistakably leads to the respective rating agency. For example, if you enter the word “Assekurata“, the rating agency you are looking for is already at the top of Google’s search results. “ASSEKURATA Assekuranz Rating-Agentur GmbH” is the correct full name of the agency. However, it can be assumed that most users do not bother to type in the full name including the legal form (“GmbH”), but are content with the word “Assekurata“. By the way, that is also the website’s domain name,
  • Entering the word “Creditreform” does not land you directly on the website of the rating agency, “Creditreform Rating AG“, but on the website of the group of companies to which the agency belongs. In addition, there are no other confusing results among the first search results. All search results for the keyword Creditreform lead to the right group of companies.
  • But if you search for the word “Scope”, you will likely get a translation of the word or a lexicon entry for “scope”. Who searches for this word “scope”, often searches for the following words as well, writes Google: Vortex, Scope statement, Zoom lens, C-Programming language, Carbon dioxide, and more. All of these search terms are not at all related to the EU-registered credit rating agencies in Berlin and Hamburg. Only those who want to be sure to find one of these rating agencies will find it under the following entries: “Scope Ratings” or “Scope Hamburg“. It is therefore imperative to add the word “Ratings” or, in the case of the Hamburg-based agency, to add the word “Hamburg”.

The more German federal states are marked in a shade of blue and the darker the blue, the more inquiries Google was able to record.

ASSEKURATA Assekuranz Rating-Agentur

12 months as of August 27, 2021. Klick on it for update!

Creditreform Rating

12 months as of August 27, 2021. Klick on it for update!

DBRS Ratings

12 months as of August 27, 2021. Klick on it for update!

GBB-Rating Gesellschaft für Bonitätsbeurteilung

12 months as of August 27, 2021. Klick on it for update!

Moody’s Deutschland

12 months as of August 27, 2021. Klick on it for update!

Rating-Agentur Expert RA

12 months as of August 27, 2021. Klick on it for update!

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Interest in rating agencies from all over Germany

As the figures show, there is keen interest in most rating agencies domiciled in Germany. So these rating agencies are searched again and again: Assekurata, Creditreform, DBRS, and, last not least, Moody’s. It also shows that the important financial centers in Germany are obviously relevant for the number of searches for these agencies. The city of the headquarters of the rating agency also seems to play a role, as does the industry or international orientation.

It should be emphasized once again that the searches are only made for those agencies that are also based in Germany. Rating agencies such as S&P Global Ratings or Fitch Ratings, which also have offices in Germany, but rather have their registered company domiciled in another country, are not taken into account. This search restriction is not associated with any judgement of the services provided by these agencies, but serves better comparability of the search results.

On the basis of the evidence shown above, the following hypotheses could be discussed:

  • Assekurata is based – and therefore searched there – at the insurance location Cologne, but is also wanted in the financial center of Frankfurt.
  • Creditreform is sought after all over Germany, as the company group also enjoys a reputation as an information bureau or credit agency.
  • In the case of DBRS, the connection to Morningstar and the fund rating might have led to a high number of searches.
  • With its international reputation as a US market leader, Moody’s is sought in the internationally important financial centers of Germany.

Now, however, the question arises why there are not a lot of search queries to be observed with the other agencies that would allow Google Trends an overview of the whole of Germany with blue coloring. Why do these agencies find less interest? The following facts and assumptions can be put together for this purpose. However, these can only help to understand the results, but cannot replace more detailed investigations.

The financial services industry specialist

As an independent European rating agency, GBB-Rating offers clients a portfolio of services encompassing rating, risk analysis, scoring and benchmarking. GBB-Rating’s credit assessments focus on banks, building societies and leasing companies. GBB-Rating is a subsidiary of Prüfungsverband deutscher Banken e.V. (Auditing Association of German Banks).

As an independent credit rating agency registered with the European Securities and Markets Authority (ESMA), every year it analyzes the credit standing of private commercial banks in Germany and numerous European institutions. Since 2012 the ratings produced by GBB-Rating have been one of the factors used to calculate the contributions payable by the banks to Entschädigungseinrichtung deutscher Banken GmbH (EdB), the subsidiary of the Association of German Banks that guarantees savers’ deposits.

Most of the ratings from this agency are not published at all, but rather communicated directly to the banks assessed. The rating is primarily important for the relationship between banks and the deposit guarantee system.

The Compensation Scheme of German Private Banks (EdB) was entrusted by the German Federal Finance Ministry with the task of running the statutory deposit guarantee and investor compensation scheme for the private banks in Germany. The EdB’s job is to compensate the creditors of a bank assigned to it where the bank is unable to repay deposits. Liabilities arising from securities transactions conducted by a credit institution (i.e. bank) as defined in the EU Capital Requirements Regulation (CRR) are also deemed to be deposits.

Comparatively few experts are concerned with these very special questions. They are also supplied directly by the rating agency via distribution lists. An explanation for the low search volume on Google might be sought in these circumstances.

The continental specialist with roots in Russia

Rating-Agentur Expert RA GmbH is the legal entity of RAEX-Europe, affiliated with the international group RAEX. The group has more than 20 years of experience in rating and analytical industry. RAEX-Europe assigns classic credit ratings according to the international scale as well as non-credit ESG ratings (environmental, social & governance). In December 2018 together with the leading Chinese rating agency CCXI, the Pakistani VIS Group and the Islamic rating agency IIRA, RAEX-Europe signed a memorandum dedicated to the preparation and publication of analytical products for the Silk Road countries.

The agency doesn’t even run a German website. Their orientation is international and the domiciliation in Germany is a decision for Germany as a location in the European Union, since EU-registered rating agencies must have a seat in the European Union. The services of this rating agency are aimed at a special professional audience such as those with interests in the post-Soviet states.

The all-rounder with a claim to market leadership

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Failsafe Test Case To Be Averted

Actions, Authorities

Transactions of Lang & Schwarz Aktiengesellschaft are the subject of a tax audit, reports the company in a publication of inside information in accordance with Article 17 of Regulation (EU) No. 596/2014.

The subject of the tax audit is an examination of the business of Lang & Schwarz Aktiengesellschaft in the financial years 2007 to 2011 in connection with investigations under criminal tax law. In the investigation, Lang & Schwarz Aktiengesellschaft is the addressee of a request for information and disclosure. This involves the persons responsible at Lang & Schwarz Aktiengesellschaft on suspicion of unlawful offsetting or reimbursement of unpaid capital gains taxes and solidarity surcharges in share transactions on the dividend date.

Lang & Schwarz Aktiengesellschaft plays a crucial role in trading so-called “wikifolios“. Each wikifolio can, if it meets certain criteria, serve as a fictitious reference portfolio to which a wikifolio index refers.

Lang & Schwarz Aktiengesellschaft issues endless index certificates on the wikifolio index. These endless index certificates are traded on the Stuttgart Stock Exchange and can be bought and sold at almost all banks and online brokers via the Stuttgart Stock Exchange or directly from Lang & Schwarz.

Wikifolio certificates are secured. “That means,” writes wikifolio Financial Technologies AG, “defaults from an issuer risk generally associated with investments in certificates are largely hedged.” The market capitalization of Lang & Schwarz Aktiengesellschaft is currently well below half a billion euros, which affects the susceptibility to short-seller attacks. These in turn could influence the company’s credit rating.

Therefore, investors in wikifolio certificates must take into account the unlikely but possible event that a test case of the fail-safe protection of the certificates could occur.

Art Markets’ Susceptibility to Rating Repair


The professionalization of an asset class can only be achieved with reliable rating offers.

More artworks are offered and traded digitally than ever before. With 24/7 worldwide bidding, “Artnet Auctions” is a leading online-only marketplace for buying and selling fine art. New bidders, buyers, and consignors across categories, geographies, and demographics entrust artnet Auctions with their needs.

Efficiency, digitally native operation, quick turnaround, and continuous sales throughout the year are the strengths of artnet in the industry. The auction platform allows for immediate transactions, with a seamless flow between sellers, specialists, and collectors. Complementing the online auctions, artnet can be considered as a leading resource for researching art online.

Founded in 1989, Artnet’s product suite has revolutionized the way people discover and collect art today. The Price Database contains more than 14 million auction results from 1,900 auction houses dating back to 1985, providing an unparalleled level of transparency to the art market. The Gallery Network platform connects leading galleries with collectors from around the world, offering a comprehensive overview of artworks for sale. Artnet News covers the events, trends, and people shaping the global art market with up -to-the-minute analysis and expert commentary. Artnet AG is listed in the Prime Standard of the Frankfurt Stock Exchange, the segment with the highest transparency standards.

The changes in the art market are picking up speed at a tremendous pace. Changes no longer take place over decades, but rather over years and months. Artnet Auctions provide an example for the market dynamics. Artnet Auctions fee-based revenue increased significantly by 23% to 3.0 million USD in the first six months of 2021, as compared to 2020 (2,423k USD). Following continued record success in the first half of the year, Artnet Auctions has announced several key initiatives and sales in advance of the Fall 2021 season. Artnet starts to offer Non Fungible Tokens (NFT) as part of artnet Auctions fall season sales. “Bridging the gap between the traditional art business and the crypto world, we will be offering a diverse selection of NFT artists this fall,” said Jacob Pabst, Artnet CEO.

How do the transactions work?

True to the business’ belief in ensuring opportunity for transaction and liquidity in the art market at all times, Artnet Auctions is offering a sale of Robert Indiana’s iconic and rare to market LOVE this August. With an estimate of 250, 000 USD to 350,000 USD the all red sculpture from a series of eight will be live for bidding through August 25th – a time that has historically been quiet in the market for works of this caliber. The LOVE sale closes alongside 21st Century Prints, a sale featuring new and old works by widely renowned artists and printer-publishers, such as Banksy, Damien Hirst, and Nicolas Party.

At Artnet Auctions, a second iteration of the “Africa Present” sale, presented in partnership with Africa First founder Serge Tiroche, will go live on August 31, 2021. “This second iteration will additionally be presented in partnership with Latitudes Online, a leading online destination for the African art market. The sale will featu re works by Aboudia, Ablade Glover, Patrick Bongoy, Virginia Chihota and more.”

The experts at Artnet forsee that September will be a strong month for Artnet Auctions, which will feature a number of important sales, including Important Photographs , the category’s top sale of the season. “The sale will feature a work by German artist Andreas Gursky carrying an estimate of 300,000 USD to 400,000 USD. Additionally, works by Irving Penn, Cindy Sherman, and Vik Muniz will be offered within this spectacular sale.”

The role of art ratings

The core idea of every rating is to express a probability of the extent to which the expectations of a buyer or investor are met. While a system of credit ratings and rating agencies has developed for the bond markets over the last century, which, with state authorization and supervision, provides an elementary basis for private, but especially professional investors to make decisions about investments, there are approaches to art rating so far only in its infancy.

There is just as much controversy about the criteria and standards to be used in an art rating as about the suitability of the methodology and models. With the change in the forms of trade, the conditions for pricing also change, because every art market is nothing else than the economic place where supply and demand for art meet. Capturing, ascertaining, recognizing, evaluating and assessing the factors that determine an art rating is an art in itself.

The know-how and the skills to assess the value of art not only for today, but also with regard to its development for the future, are in the hands of comparatively few experts. The knowledge can be found in auction houses, gallery owners, leading collectors and, of course, the artists themselves, to name a few.

However, in order to develop an asset class more broadly and, in particular, to make it accessible to institutional investors who are required to report to their investors and stakeholders, independent ratings are required that express a neutral assessment. Today value judgments can still be found in numerous media and organizations of the art trade as well as museums.

The confusion of all these opinions leads to the formation of opinions by buyers as well as sellers of art. Accordingly, opinions about high, medium or low probabilities of a positive development in the value of art are expressed in a correspondingly little evidence-based manner. In the financial markets, credit ratings are the language used to express the probabilities of default. Stock ratings are used to express buy, sell or hold recommendations. Institutional investors can use this sophisticated system to make rational investment decisions.

The more unprofessional ratings are given, the more likely it is that expectations of art investors will be disappointed. Likewise, art collectors will regret their sale when they quickly realize that they could have realized a much higher price in a short period of time. Avoiding all of these disappointing decisions depends on the availability of efficient art rating systems.

The greatest boom in the art markets is yet to come. If rating systems become available that make the performance of art fund managers comparable and controllable, the art market would make even more financial resources available in the billions.

The Graveyard of Authorized Credit Rating Agencies in the European Union

Agencies, Authorities, Certifications, Registrations

Rating agencies have been registered in the European Union since 2010 in order to operate in accordance with the EU regulation on rating agencies of 2009 (CRAR). Dozens of agencies have therefore made use of the option, but also the obligation, to register or get certified. Rating agencies are only allowed to operate in the European Union after authorization, namely registration or certification.

A public list is kept at the European Securities and Markets Authority (ESMA) on the registered or certified agencies. This list is an important reference for all market participants in order to find out about the approved agencies.

In order to make it easy to find it, the list of authorized credit rating agencies was linked e.g. from the website from the beginning. Since 1998, long before the word “blog” found its way into the German language, the website has been dealing with credit rating issues and the statutory or voluntary regulation and self-regulation of credit rating agencies.

It is less well known that a number of rating agencies have now returned their licenses. The return of licenses was particularly evident through brexit, when all those rating agencies that are based in Great Britain and were registered there could no longer be recognized by ESMA.

The following is a complete list of 16 de-registered or de-certified credit rating agencies as of May 7, 2021:

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Credit Rating Agency Authorisation 2021

Agencies, Authorities, Certifications, Registrations

Links to websites of the Credit Rating Agencies authorized in the European Union.

The credit rating agencies listed below have been registered or certified by the European Securities and Markets Authority (ESMA) in accordance with the Credit Rating Agencies Regulation. Domains of websites are added. According to ESMA, the list was last updated on May 7, 2021.

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A Hurdle Of Practical Importance

Definitions, Modifiers, Scales, Symbols

The clear divide between investment-grade and speculative-grade debt markets dates back decades.

A number of central banks make their bond purchase programs dependent on minimum credit ratings. These are often operationalized by specifying rating symbols, such as the rating symbols Baa3 or BBB-. When a rating agency tries to win paid orders from issuers by giving benevolent ratings above this threshold, it is damaging the system on a very fundamental level. The rating agency Moody’s Investors Service has now presented an in-depth analysis with which it shows – inter alia – why it takes this threshold so seriously.

“Between the 1930s and the late 1970s,” tells Moody’s, “investment-grade companies issued almost all public bonds in the US, and the speculative-grade (or high-yield) bond market consisted solely of companies that had been downgraded out of investment grade (i.e., fallen angels).”

According to Moody’s, it was not until the early 1980s in the US, and later outside of the US, that a robust speculative-grade public bond market emerged and grew rapidly, fueled mainly by private equity-sponsored leveraged buyouts. Since the 1980s, the high-yield market has continued to expand as its own asset class with distinct investor groups. As a result, a clear divide has been maintained between the investment-grade and speculative-grade debt markets.

The classification is still at least as important today as it was in the past. Increases in credit spreads and losses at the investment-grade/speculative-grade divide are relatively large. One factor underlying the importance of this divide is the relatively large percentage changes in corporate credit spreads and losses when moving from investment grade to speculative grade, and vice versa.

“The percentage increase in spreads moving from Baa3 to Ba1 is materially larger than at almost all other points on the rating scale,” says Moody’s, “both in the first half of 2021 and over a longer period from 1991 through 2020.” Another finding in Moody’s report: “The investment-grade and speculative-grade divide delineates a difference in historical credit losses between Baa3- and Ba1- rated nonfinancial companies that is larger than at most other points on the rating scale.”

According to the data published by Moody’s, these relatively large differences across the Baa3/Ba1 divide are long-standing. “Regulations and portfolio governance rules that hinge on the distinction between investment-grade and speculative-grade ratings have led to these differences and have driven differences in financial policies and liability structures.”

See Moody’s Investors Service, Sector In-Depth: Corporates – Global, A closer look at the investment-grade / speculative-grade divide.

Price Tag

Rating Repair Pricing Model

Advisors, Consulting

What makes the price positioning of our rating repair shop so unique.

Our RATING©REPAIR brand has only one price, namely only a single monthly subscription fee, billed by WordPress and the payment service provider Stripe. With this price we position ourselves between

  • the monthly subscription fees of newspapers, magazines and other data providers on the one hand and
  • the offers of consultants and consulting firms on the other.

Our price is higher than with other blogs and accounts because we want to know each and every subscriber and focus on their interests exactly. With our RATING©REPAIR service, however, we do not offer any individual management consultancy that is based on customized project definitions with milestones specifically set by customers. Our service is also not a machine-operated robo advisor.

We see ourselves more like editors who know their most important readers personally, or like consultants who deliver a message or replicable management approach that is relevant to many consulting customers. In any case, we seek a conversation with our subscribers to understand what research and information we can help with.

Advisory Markets

The price positioning can be illustrated as follows. The advisory market is characterized by the dimensions of the price (per unit of time or quantity) and the degree of individualized customization. The higher on the vertical axis, the higher the price. The further on the horizontal axis, the higher the level of individualization of the advice. At the bottom left are the offers of the media, for example the websites of leading newspapers and magazines as well as news services, which at best only cater to a very limited extent to the individual interests of users using cookies on their websites. At the top right, on the other hand, are the leading consulting firms that do not operate under daily rates less than several thousand euros and often only accept project orders if they have a budget of at least six figures. RATING©REPAIR is therefore positioning itself as the very first service between these providers in a niche that has so far remained completely vacant.

Art Ratings And Tokenisation Will Feed Artists

Assets, Platforms

A new art tokenisation platform is important news for the art rating industry.

The rating of an artist is the indication that helps evaluate the value of an artwork, the rating of an artwork helps to understand the investment characteristics of art. 360X AG reports the successful completion of first Proof-of-Concept transactions with tokenised art.

There are many people who have experienced the frustration of following a famous artist throughout their early years only to find that the vast majority of their work is financially out of reach. Participation through fractionalisation alleviates this problem, allowing individuals to invest in their favourite artists. Art ratings and tokenisation are the two key ingredients which would enable more people to collect art and make long-term investments, which leads to more artists being able to make a living from their art.

360X Art AG runs a tokenisation platform for art of 360X AG. It announces that it has entered into a strategic partnership with a group of industry leaders in the European art market, Rüdiger K. Weng, Weng Fine Art AG and Johann König. Under the terms of this partnership Weng, WFA and König have invested in 360X Art AG in return for a stake of more than 20%.

Based in Frankfurt, 360X Art AG is a platform that builds and operates a dedicated, trusted digital ecosystem and infrastructure for the digitisation, tokenisation and fractionalisation of both high-quality physical as well as digital artworks. The company is directly connected to the recently announced trading platform of 360X, where digital tokens of art assets and other high-quality investment objects are made accessible, investable and tradable for investors.

The new technology is strongly needed to bring new liquidity, transparency, trust and democratised access to the art market and fine art investments. It could add a new dimension to trading art and will support professional financing structures to initiate future growth of the art market.

China Has Already Achieved Its Goal For 2021


“The growth of the Chinese economy was quite robust in the second quarter with a plus of 1.3 percent, but will slow down noticeably in the third quarter.” This is what Axel D. Angermann writes, who, as the chief economist of the FERI Group, analyzes the economic and structural developments in all of the markets that are important for asset allocation.

“After the economy had returned to the pre-corona growth path at the end of 2020 and the economic consequences of the pandemic for China had thus been practically overcome,” reports Axel Angermann, “the Chinese leadership began to reduce the monetary and fiscal policy stimuli that they had previously used to overcome the crisis.”

Attention has shifted again to the containment of the enormous imbalances within the Chinese economy and in particular the excessive indebtedness. “An outward sign of the changed priorities was the, by Chinese standards, extremely unambitious requirement to strive for growth of more than 6 percent in the current year, which in view of the low level of the previous year could hardly be missed from the outset”, says Axel Angermann.

The consequences: the volume of loans granted in relation to GDP is again as low as it was at the end of 2018, when a similar economic policy regime prevailed, and significantly fewer government bonds than in the two previous years. “The purchasing managers’ indices are still above the important expansion threshold of 50 points, but have been falling since the beginning of the year”, warns Axel Angermann. “Industrial production growth has declined by several percentage points, while retail sales growth has remained at a low level. The trend in imports remained positive until recently. In contrast, exports stagnated at a high level, which again led to a lower trade surplus towards the pre-Corona level. As a result, consumption, investment and foreign trade already contributed less to overall economic growth in the second quarter than in the previous quarter. There is much to suggest that this development will continue in the third quarter and that overall economic expansion will be slowed down as a result.”

Positive impulses from China for the global economy are therefore not expected for the time being, which has an impact in particular on those countries that benefit to a considerable extent from exports to China, i.e. many emerging Asian countries and, in Europe, Germany in particular. “However, strong negative effects also appear unlikely: China’s leadership is well aware that their approach is a balancing act that harbors the risk of higher unemployment and social unrest. The stricter regulation of the private education system,” provides Axel Angermann an example, “is also likely to be due to the need to limit the financial burden on households for tutoring.”

He believes that the lowering of the minimum reserve ratios that the banks have to keep at the National Bank is more important: “This clearly sends the signal that they do not want to push ahead with reducing lending at any cost. There is therefore much to suggest that lending will stabilize at the lower level it has now reached. In the medium term, China’s economy would thus swivel on a course of moderate growth slightly below the 6 percent mark. The greatest risk remains that existing tensions with the US will result in a kind of cold economic war. An increasing decoupling of the two economic blocs from one another would not only jeopardize globalization, but also put Europe in an extremely difficult position.”

man opening blue briefcase with documents

Disclosure Requirements Are A First Step To SPACs Rating Criteria


No blank check for SPACs.

Special purpose acquisition companies (SPACs) are shell companies that are admitted to trading on a trading venue with the intention to acquire a business and are often referred to as “blank check companies”. The European Securities and Markets Authority (ESMA) encourages National Competent Authorities (NCAs) to focus their scrutiny of SPACs prospectuses on a number of disclosure requirements.

ESMA counts the following among these requirements:

Risk factors, strategy and objectives, escrow accounts and the reinvstement of the proceeds, relevant experience and principal activities of the administrateive, management and supversiory bodies, conflicts of interest and sponsors,shares, warrants and shareholder rights, major shareholder, related party transactions, material interests, information on the proceeds of the offer, information on the intention of certian persons to subscribe in the offer, information on the offer price, and additional disclosure likely to be required to satisfy the Prospectus Regulation.

In practice, this provides a grid to which SPAC rating criteria can be linked. In fact, however, a large number of additional criteria are necessary in order to assess the risk of investing in SPACs. Therefore, compliance with disclosure requirements under this list must not be equated with an investment recommendation.

disco mirror balls in bright light

GlobalCapital Celebrates KBRA


2021 Securitization Awards.

Kroll Bond Rating Agency (KBRA), a global full-service rating agency, was named “Securitization Rating Agency of the Year” by GlobalCapital at its U.S. Securitization Awards 2021.

“KBRA was founded in 2010 to set a standard of excellence and integrity, and we have been loyal to this notion since then,” Eric Thompson, Global Head of Structured Finance at KBRA, said. “It is an honor to be recognized by key market participants as the Securitization Rating Agency of the Year, proving that our founding principles and innovative approach have led us here. I’m proud to be part of a company that focuses on providing best-in-class service to investors—a common goal shared across all sectors.”

In 2011, KBRA issued its first rating in the CMBS sector. The company’s Structured Finance Group has since rated over 2,000 transactions. KBRA considers itself also a thought leader for its unique environmental, social, and governance (ESG) approach, setting them apart in the credit rating agency space.

“We look forward to continuing our engagement with the market and providing comprehensive, timely analysis,” Thompson said.

action ball field game

Kickers Don’t Hit


URA Research GmbH is once again coming up with new insights into bonds.

After reviewing and analyzing the financial reports published in 2021, the URA ratings for 13 bonds were confirmed. For 2 bonds (FC Schalke 04 III and Katjes III) the assessment has deteriorated. The 4th bond from Schalke 04 and the 1st bond from Werder Bremen were newly included in the URA monitoring. In the case of follow-up bonds, the coupon usually falls due to the overall lower interest rate level.

“External ratings have almost not been obtained for a long time,” writes Jens Höhl, Managing Director of URA Research GmbH. When his company started as URA Unternehmens Ratingagentur AG in 1997, the prospects for external ratings on the bond markets in Germany were still different. While competitors continued and are now embroiled in scandals such as at the Greensill Bank, the URA wisely withdrew from this business of publishing credit ratings years ago and has since been working as a specialist with the company “URA Research GmbH“.

“Because of the frequent private placements, fewer and fewer securities prospectuses are published. At least the bond conditions improve in individual cases “, Jens Höhl continues, and at least there is no deterioration overall: e.g. obligation to publish financial reports after a certain period of time, sometimes also linked to interest rate step-ups, or limitation of financial debt or minimum equity ratio, involvement of trustees, e.g. for bonds based on the Nordic bond format.

low angle photo of woman wearing white dress

Big International Banks Kept Beauty


In its 2021 banking study, the independent Swiss credit research institute Independent Credit View AG (I-CV) examined the global banking sector.

A universe of 47 credit institutions in 16 countries – including the D-A-CH region – was scrutinized using a comprehensive analysis with a stress test. The good news is that the major international banks are doing better than feared. “They are not part of the problem this time”, writes I-CV.

Despite the pandemic and global recession, major international banks are generally in good shape. Only a few banks have structural problems. “Based on our current bank study, we expect mostly stable to positive developments this year and also in 2022. And this despite the probable rise in problem loan rates. We see a robust basis thanks to the progress made by the banks in terms of sustainable profitability, capital and liquidity – also as a result of stricter regulation. In addition, there is massive support from governments, central banks and banking supervision for households and companies and – ultimately – also the banks. The average I-CV rating level is between A and A- and is thus higher than in the previous five years,” says Christian Fischer, lead author of the I-CV banking study.

The I-CV Banking Study 2021 takes numerous questions into account: How much does the pandemic affect the credit profiles of banks? What are the long-term challenges for the business models of banks in terms of structural change? How long will the low interest rate environment last and how much does the long-term refinancing program of the European Central Bank help to counter the pressure on margins and to stimulate lending? And where can problem areas (black holes) open up in the banks’ balance sheets?

“With our extensive stress test, we have taken these questions and many other facts into account in order to provide bond investors with important guidance for their investment decisions. 29 European and 11 North American banks as well as 7 credit institutions from Australia and Singapore were put through their paces,” says Fischer.

North America & Asia versus Western and Southern Europe: the gap is widening

Regarding the results of the study, Fischer says: “The iceberg problem in the banking sector is the tail risks in credit and trading books as well as an appropriate identification and control of risks (the Archegos bankruptcy is an example). In general, 2020 and Q1-2021 surprised both positively and negatively. Despite solid financial figures, the business models of individual banks speak against a more positive view of creditworthiness. The macroeconomic situation and corona-endangered industries remain the most important risks in the short term. If there are no major geopolitical crises and market dislocations, the gap between banks from North America and the Asia-Pacific region on the one hand and banks from Western and Southern Europe on the other is likely to widen in the medium term. The latter suffer from overcapacity and often do not earn their imputed capital costs. In investment banking, European banks are struggling to keep up with US investment banks only in sub-segments, but they are in danger of losing ground. Spreads and yields for bonds from all layers of the capital structure of the banks (senior preferred, senior non-preferred, tier 2, additional tier 1) as well as the risk differentiation are often insufficient”.

In conclusion, banking expert Fischer says: “We recommend bonds along the entire balance sheet structure of defensive banks with good credit ratings. While senior preferred instruments are acceptable for all banks in the study, we recommend senior non-preferred and subordinated bonds only for selective issuers. We would focus on new issues (premium) as well as terms (first call dates) in the shorter range. In addition to the above-mentioned banks from North America and the Asia-Pacific region, Northern European credit institutions are among the banks with the highest creditworthiness and therefore security-conscious investors should pay special attention to them. “

A Liberal, A Banker of the Year


Who secures the Aaa of EIB.

Liberals are not exactly popular among bankers, as they stand for competition and a market economy, where many bankers want state protection and privileges. This makes the award for Dr. Werner Hoyer, President of the European Investment Bank (EIB) as Banker of the Year, particularly noteworthy. The laudation from President of the European Commission, Ursula von der Leyen, contains many deserving facts and can be read here. Werner Hoyer is a member of the FDP, the Free Democratic Party in Germany, where he made his career up to the Foreign Office.

Werner Hoyer has been at the helm of the EIB since 2012, which, like few other banks in Europe, also has the undisputed top rating from all major credit rating agencies. Moody’s just released a report with lots of detail.

“The credit profile of the European Investment Bank (EIB) reflects its strong financial metrics, including robust asset quality and asset performance as well as unfettered access to diverse funding markets. The EIB has a long track record of very low levels of non-performing loans (NPLs),” writes Moody’s Investors Service in its “Issuer In-Depth” annual credit analysis, “reflecting its prudent project selection as well as effective monitoring and superior risk-management capabilities.”

According the international rating agency, the EIB is also among the few supranational issuers with access to central bank liquidity, in its case to the European Central Bank’s (ECB) main refinancing operations as well as the Swiss National Bank (SNB): “This ensures access to liquidity in the highly unlikely event it lost access to the capital markets.”

Moody’s sees among the EIB’s shareholders, the EU member states, a strong willingness and ability to support the bank if required. In a stress scenario, says Moody’s, the EIB would be one of the few sources of long-term funding for projects in the EU countries. The EIB is also the key institution implementing the European Fund for Strategic Investments (EFSI) and its successor programme, InvestEU. Similarly, the EIB has played an active role in the EU’s coronavirus crisis response.

“The EIB’s credit challenges, which are marginal at the Aaa rating level, stem from its high leverage compared to many peers as well as only moderate liquidity buffers, although its lending activities carry low intrinsic risk. Moreover,” argue Moody’s experts Steffen Dyck, Raphaele Auberty, Dietmar Hornung and Alejandro Olivo, “leverage has been on a declining trend over the past several years, and the comparatively only moderate liquidity position is mitigated by ECB access, very strong liquidity management and the generally high quality of treasury assets.”

Accodring to Moody’s findings, the EIB’s capital base is now stronger than it was before the United Kingdom’s (UK, Aa3 stable) exit on 31 January 2020 after its remaining shareholders replaced the UK’s share, and Poland (A2 stable) and Romania (Baa3 negative) provided additional capital.

But even with the best conditions, political and economic common sense in the member states of the EU is also important for the EIB: “Downward pressure on the EIB’s rating could emerge in a scenario of a significant and multiyear deterioration in its intrinsic financial strength coupled with a reduced ability to provide support (as evidenced by material rating downgrades of key shareholders), or if shareholders demonstrated less willingness to provide support in case of need.”

Moody’s credit analysis elaborates on EIB’s credit profile in terms of capital adequacy, liquidity and funding and strength of member support, which are the three main analytical factors in Moody’s Supranational Rating Methodology.

elegant young teenage female standing in green park with horse

ESG-Rating: Animals Count more than Humans


Mistreating workers is not as important as mistreating animals.

Consumers play an active role in the application of ESG criteria, i.e. Environmental, Social, and corporate Governance data that refers to metrics related to intangible assets within the enterprise. A survey throws a dubious light on the values of American and German consumers.

According to a survey published by Statista, the number one reason to “cancel” a brand – or at least boycott or protest them – is the mistreatment of animals: “Animal cruelty was named as the top reasons why consumers would give up on a brand in all three countries included in the Cancel Culture survey which is a content special of the Statista Global Consumer Survey. 44 percent of the more than 1,500 U.S. respondents said they would give companies mistreating animals the boot, ahead of the mistreatment of workers at 41 percent. UK respondents saw things similarly, while in Germany, worker mistreatment only came in rank six after environmental harm, corruption, health concerns around products and racism.”

Infographic: What Companies Get Canceled For | Statista You will find more infographics at Statista
coins and a piggy bank

Ernst & Young No Longer Has Any Equity On Its Balance Sheet


Auditors have been making double-digit million losses for years.

At Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft (EY) in Germany, “equity” is on the assets side, namely as a “deficit not covered by equity” in the amount of € 62,715,000. The provisions, liabilities, deferred income as well as deferred taxes and fiduciary obligations exceed the company’s assets by an eight-digit amount in euros within a year. Receivables against this company are therefore no longer fully covered by assets on the balance sheet.

The trend line that had to be shown here for equity and equity ratio for EY on March 3, 2021, continues as expected. According to the consolidated financial statements and group management report as of June 30, 2020 of the Stuttgart-based parent company, the company no longer has any equity. Turnover was weaker than that of the other large auditors in Germany.

Under the chairman of the supervisory board, Georg Graf Waldersee, the German company has only made losses for years. This is also the case in the current reporting period. In the consolidated income statement for the financial year from 07/01/2019 to 06/30/2020, the consolidated net loss for the year is stated at € 49,608,000.

The billions in damages from the Wirecard scandal are not included: “In connection with the Wirecard case before and after the balance sheet date, claimants attempted to assert civil claims against us with out-of-court letters. On June 30, 2020, we were served complaints from investors that were judged to be unfounded both internally and by the law firms commissioned to defend us.”

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No Vaccination Against Bad Loans


Keynote of Prof. Dr. Joachim Wuermeling, Deutsche Bundesbank, at NPL Forum in Frankfurt am Main.

“NPL dismantling” provides one of the keywords for the speech of Prof. Dr. Joachim Wuermeling, Member of the board of the Deutsche Bundesbank. In his keynote at the Frankfurt School’s NPL Forum he widens the view and takes a look to Europe. “Because: When it comes to NPL, we have to think and act European. Even if the stocks of non-performing loans in Germany are low, they can become a problem elsewhere in the euro area, initially for the respective country itself, but also for the euro area as a whole.” He sheds light on three aspects.

  • First: “In the past few years, we have made important progress in reducing the NPL in the euro area. While the NPL inventory of significant institutions in the euro area was almost € 1 trillion in mid-2016,” says Joachim Wuermeling, “it had more than halved by the end of last year, to just under € 450 billion.” However, the stocks are still very unevenly distributed across the countries of the euro area. Key milestones in this NPL decline were the ECB’s 2017 NPL Guide and the 2018 Addendum. The guide primarily targets non-performing loans that were built up during the financial crisis. “The addendum, on the other hand, formulates supervisory expectations for risk provisioning for new NPLs, so it has a preventive effect. However, following the progress made in reducing the NPL in recent years, the pandemic could now turn the trend.”
  • That is Joachim Wuermeling’s second point: a renewed spike in non-performing loans is probably only a matter of time in the euro area. As soon as the support measures expire, he expects to see an increase in the NPL level. “Basically it is of course part of the banking business that individual borrowers get into payment difficulties; that cannot be avoided at all. Banks must write-down or write-off loans as necessary, and they must collect and dispose of collateral. But here, too, the dose makes the poison”, warns Joachim Wuermeling. Through higher provisions, rising NPL stocks have a negative impact on the already weak profitability of European banks. This could also affect their solvency as a result. The higher the NPL rate in the system and the more uncertain the economic situation, the more likely investors and depositors are to question the quality of bank balance sheets and the ability of the institutions to make further value adjustments and absorb possible losses. “It is therefore important to take countermeasures now”, Joachim Wuermeling calls for action. “This will pose challenges in particular for those institutions and countries that already had a high level of non-performing loans before the pandemic began.”
  • Supervision and politics are already acting, says Joachim Wuermeling. In December 2020 the ECB sent another “Dear CEO Letter” to the significant institutes. “Among other things, it makes it clear what to expect in terms of risk provisioning. It also collects information on how banks deal with credit risks and how they determine the necessary risk provisions. There is no intention or reason to soften the ambitious NPL rules. And the EU Commission is also providing important impetus with its NPL action plan of December 2020. In this plan, the Commission proposes new measures and takes up the outstanding aspects of the 2017 Council NPL Action Plan. The Commission wants to facilitate the handling of Covid-related NPLs at an early stage and thus prevent a renewed accumulation of non-performing loans on European bank balance sheets.” The focus is on measures to promote secondary markets, set up asset management companies and improve insolvency frameworks. The Commission also comments on precautionary public support measures.

With a view to the secondary markets, the main thing is more transparency. The Commission’s proposals could make an important contribution here, says Joachim Wuermeling: a common data set and data standard for NPL transactions within the EU would make the markets more transparent. Data quality, data comparability and data infrastructure are the key words.

Joachim Wuermeling also welcomes the Commission’s proposal to set up and network national Asset Management Companies – AMCs for short. “However, this must be done on a voluntary basis, without community funding and in accordance with EU state aid rules.”

AMCs have already proven themselves in the past as a tool for NPL reduction. By means of economies of scale, better coordination of creditors and the pooling of expertise, they can help to clean up bank balance sheets. “The proposals in the action plan are correct – but they must also be taken up and followed up.” Joachim Wuermeling points to some initiatives: the EBA is currently consulting its standardized NPL data templates, which have been reduced in scope, and the Commission is putting its proposal for a European data hub up for public discussion by early September.

Ultimately, however, the banks themselves have to set up value adjustments in good time and in line with the risk in order to counter an increase in non-performing loans. “This is probably the most important lever to arm yourself for a Europe-wide increase in non-performing loans and to prevent negative repercussions on the real economy”, says Joachim Wuermeling.

This is how he sums up his remarks at the Frankfurt School:

  • First: “We must not allow ourselves to be lulled into deceptive security by the still low number of corporate insolvencies. As soon as the state aid runs out, bankruptcies are likely to rise. The rise in non-performing loans should be limited for German credit institutions. Nevertheless, caution remains the order of the day.”
  • Second: “The German banks are in good shape. They are more resilient and better equipped with capital than they were a few years ago. But they have to catch up in risk management: they have to create more transparency with regard to credit risks and improve their data skills.”
  • Third, bad loans are a European issue: “After the progress made in recent years in reducing NPLs, the pandemic could now turn the trend. It is all the more important to take countermeasures now. The EU Commission does this with its NPL Action Plan of December 2020. Now it is time to implement the proposed measures.”

There is no vaccination against bad loans. Nevertheless, banks have many options for getting themselves into a form in which post-Covid cannot harm them.

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Ilija Batljan’s Rating Shopping Spree


Are upgrades driven by improvements in creditworthiness or by hopping from agency to agency?

The activities of self-made millionaire Ilija Batljan are too conspicuous to be ignored in the financial markets. Ilija Batljan came to Sweden from Montenegro. He moved to Sweden in 1993 during the breakup of his native Yugoslavia and in 1996 earned a B.A. in economics at Stockholm University, later disputing in 2007. A man with a migration background, Ilija Batljan quickly made a career in politics and became mayor of Nynäshamn in 2005 and campaigned against wealth and property taxes in his Social Democratic Party of Sweden in 2010.

There is now a long list of companies in which he plays or played the role of investor, Chairman, Chief Executive Officer and/or Director:

However, the long list of mandates and investments does not suggest diversified assets and balanced risk positions. Some of the mandates are subsidiaries or small companies. His largest investments is reportedly Samhällsbyggnadsbolaget i Norden AB (SBB). According to the shareholder structure as of March 31, 2021, Ilija Batljan held (private and through company) 8.46 % of share capital and 32.54 % of votes in SBB.

Moody’s Single B Credit Rating Category

Anyone looking for information from the internally recognized credit rating agency Moody’s Investors Service on the high debts of Ilija Batljan’s numerous companies will have to go back years in their research. Moody’s Investors Service had on November 8, 2017 assigned a first-time B1(Single B One) corporate family rating to Samhällsbyggnadsbolaget i Norden AB (SBB), a Stockholm-based real estate company. controlled by CEO and founder Ph.D. Ilija Batljan. The outlook on the rating was Stable. According to Moody’s rating scale, obligations rated B (Single B) “are considered speculative and are subject to high credit risk“. Moody’s appends numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through Caa.

At the time and according to Daniel Harlid, a Moody’s Assistant Vice President, Analyst and also Lead Analyst for SBB, the B1 (Single B One) rating reflected the company’s midsized property portfolio of low risk community services and residential properties in Sweden and Norway, reflecting the company’s focus on rental income from regulated markets or activities that are, in one way or another, funded by the government.

On November 8, 2017 the B1 (Single B One) corporate family rating assigned to SBB reflected all the company’s strenghts (see Moody’s):

  • high share of low-risk revenue derived from residential properties in Sweden, community service properties, as well as offices in Sweden and Norway;
  • high share of revenue generated from public tenants (over 30%);
  • diversified tenant base and property portfolio, with almost full occupancy;
  • long lease maturity profile, with an average lease length of seven years;
  • good deal-sourcing capabilities, leading to a medium-sized portfolio of SEK 22.1 billion as of the third quarter of 2017, only after 20 months since the creation of SBB; and
  • expected positive free cash flow, which will fund capital spending.

Despite all these favorable factors, it was only enough for a B1 (Single B One) rating, since the credit rating also reflected a number of challenges such as a low unencumbered asset ratio, properties located in small cities and in less liquid real estate markets than in the metropolitan area and elevated leveraged.

On April 10, 2019 Moody’s had withdrawn the corporate family rating of SBB. At the time of the of withdrawal the rating was still B1 (Single B One) and had a positive outlook. Moody’s had decided to withdraw the rating for its own business reasons: “Please refer to the Moody’s Investors Service Policy for Withdrawal of Credit Ratings, available on its website,” Ultimately, it remains in the dark what would have happened to the rating and the outlook if Moody’s had continued to assess the company. The rating history has ended.

Credit Rating Agency (CRA) - Definition of "Rating Shopping"

“Rating shopping can be understood as occurring when an issuer engages with a number of credit rating agencies with a view to selecting only those credit rating agencies that will provide the most favourable assessment for the entity or debt instrument. In choosing to appoint only those credit rating agencies that provide the most favourable assessment, risks are created for investor protection and financial stability. Specifically, risks of ratings inflation and lack of applied methodological rigour. While concerns around this practice were initially focused on structured finance ratings, recent revisions of the CRA Regulation have expanded the area of focus to the broader spectrum of entities and debt instruments assessed by CRAs.”

Source: Consultation Paper - Guidelines on Disclosure Requirements for Initial Reviews and Preliminary Ratings, European Securities and Markets Authority, May 26, 2021, ESMA33-9-412, p. 5.

S&P Global Ratings’ Triple B Rating Category

On January 15, 2018, S&P Global Ratings had SBB assigned a BB (Double B) rating with stable outlook. This was SBB’s second public rating from a leading credit rating agency and was a two step improvement over the first rating the company received in November 2017 from Moody’s.

On April 26, 2019, S&P Global Ratings announced that SBB had been assigned a BBB- (Triple B Minus) rating with stable outlook. This upgrade came after a competitor of S&P Global came into play, namely Fitch Ratings with its BB+ (Double B Plus), which superseded Moody’s B1 (Single B One).

hallway with window

On May 5, 2020, SBB reported that SBB had been informed by the Swedish Economic Crime Authority that the company’s CEO Ilija Batljan had been detained in custody on alleged violation of the Market Abuse Regulation. The company had no additional information at this stage and did not know which company or security these allegations relate to. During Ilija Batljan’s absence, SBB’s deputy CEO Krister Karlsson was acting CEO for SBB.

Although SBB had been informed that the company’s CEO had been released from custody, the credit rating agency S&P Global announced on May 8, 2020, that they were placing SBB on Credit Watch Negative due to ”at this stage, there are some uncertainties about how” the charges against the CEO ”will affect SBB’s management and operations, including deleveraging plans which may take longer than S&P previously anticipated”.

On June 10, 2020, S&P Global Ratings affirmed SBB’s “investment grade” rating BBB- (Triple B Minus) with stable outlook and removed SBB from Credit Watch Negative. That means that SBB’s new rating was from that day on BBB- (Triple B Minus) with stable outlook for ratings on the company and its senior unsecured debt.

“Thanks to SBB’s focus on deleveraging, despite its strategy to continue to expand its portfolio, we expect the company will maintain or improve its credit metrics over 2021-2022”, wrote S&P Global Ratings on March 1, 2021. “We are therefore revising our outlook on SBB to positive from stable and affirming our ‘BBB-‘ (Triple B Minus) issuer credit rating on the company. We are also affirming our ‘BBB-‘ (Triple B Minus) ratings on the senior unsecured debt and ‘BB’ (Double B) rating on the subordinated hybrid instruments.”

Fitch Ratings’ Triple B Rating Category

On May 30, 2018, there was better news for SBB, namely from Fitch Ratings by its “Long Term Issuer Default Rating”: SBB had now been rated BB (Double B) by these analysts. On April 8, 2019, there was an upgrade to BB+ (Double B Plus). A little later it went up to BBB- (Triple B Minus) on April 16, 2019. It stayed that way to this day. The credit rating for the debt level “subordinated” remained at BB (Double B).

The close temporal relationship between the end of Moody’s rating and the upgrade by Fitch Ratings is striking. It was only on April 8, 2019 that Fitch ratings upgraded to BB+ (Double B Plus), two days later Moody’s removed its rating for the company. That was good business for SBB, because according to the EU regulation on credit rating agencies and due to the recognition of Fitch Ratings, the rating of this agency has about the same legal significance as that of Moody’s.

Scope Ratings’ Triple B Rating Category

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Political Network Makes It Possible


Berlin network of politicians, raters and auditors.

Wirecard illusion factory only conceivable through political network”, is a quote from the Cicero, the German magazine for political culture. The members of the committee of inquiry have an unequivocal answer to this. The Christian Democratic Union (CDU) sees Finance Minister Olaf Scholz at the center of the billion dollar scandal.

Fabio De Masi, chairman of the left in the committee, accuses the supervisory authorities of not being fit for the digital age. “This billion-dollar lie, this Wirecard illusion factory was only conceivable because they organized a political network.” BaFin not only let its supervision of Wirecard slip, but even wanted to actively protect the company. Lisa Paus, chairwoman of the Greens, also made the EY auditors jointly responsible, for years they had lacked “the critical attitude”.

The serious extent of the Wirecard scandal could be limited with damage worth billions, said FDP chairman in the investigative committee, Florian Toncar, in Berlin, quoted by Cicero,. The responsible authorities intervened too late, neither the Federal Financial Supervisory Authority (BaFin) nor the anti-money laundering unit FIU, both of which are subject to the supervision of the Federal Ministry of Finance, attempted to clarify the matter in good time, explained Toncar.

According to the Munich public prosecutor’s office, “commercial gang fraud” can be assumed at Wirecard, which should go back to 2015. The auditing company Ernst & Young had confirmed Wirecard’s annual financial statements for years.

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Artec Technologies Upgraded


Artec technologies AG (ISIN DE0005209589) is once again awarded an eligibility status for central banks by the Deutsche Bundesbank as part of the current creditworthiness analysis.

“The credit rating is comparable to an investment grade rating from Standard & Poor’s according to the S&P’s rating scale, the credit rating for artec has been raised from BBB- (Triple B Minus) to BBB (Triple B)”, reports the company.

The balance sheets for the past three years form the basis for the credit check by the Deutsche Bundesbank. In addition, the company-specific circumstances, the current company development and the future potential are also included in the assessment. “The positioning in the competition is also analyzed”, emphasizes artec technologies.

The core of the creditworthiness analysis was the 2020 annual financial statements. During this period, artec technologies developed positively and met the forecasts. In principle, artec plans to continue its growth path in 2021 and beyond. AI-based solutions for security authorities and the media industry should continue to be the growth drivers of artec in the future.

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Inflation Augur Sees Evidence


In May 2021, the US Consumer Price Index rose 5% year-on-year (after 4.2% in April 2021).

“Projected over the year,” says Dr. Thorsten Polleit, Chief Economist of Degussa Goldhandel GmbH in Frankfurt am Main, “the monthly increase was 10.1%.”

The price drivers were petrol (+ 2.1% compared to the previous month) and used cars (+ 7.3% compared to the previous month). “Core inflation” (ie consumer goods excluding food and energy) rose by 3.8% year-on-year. The sustained high growth in the money supply in the USA speaks for a high rate of monetary devaluation in the coming months, forsees Thorsten Polleit.

“Inflation will also become increasingly apparent in other currency areas – especially in the euro area. The central banks, which are responsible for the inflation of prices with their flood of money, are continuing their inflationary work”, predicts Thorsten Polleit.

brown wooden cube on gray textile

Influence of the Losses of the German EY


Are the French afraid of assuming losses from the German EY?

After more than two decades at KPMG and half a decade at EY, Yannick de Kerhor left EY to set up a new company, Paris-based EKEM Partners. The new consultancy will team up with EOS Deal Advisory, the London firm run by two former senior partners at KPMG UK. De Kerhor co-founded EKEM alongside veteran consultant Eric Tirlemont.

“The resignations create further upheaval as EY prepares to centralise control of its operations in 25 countries in a new Europe West region”, writes Financial Times’ Michael O’Dwyer “The overhaul has caused concern among French partners that they could be left financially exposed after the firm’s audit of Wirecard, the German fintech company that collapsed in a fraud scandal last year.” This quote confirms our assessment that EY’s auditors are experiencing an equity bottleneck.

Equity and equity ratio have been falling for years. The decline draws an almost straight line. Year after year, losses continue to consume the auditing firm’s equity. The consolidated financial statements of the German “Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft” for the financial year from July 1st, 2018 to June 30th, 2019 are still the “most recent” financial statements published in the Federal Gazette.Until June 25th, 2020 there were still several additions to the publication in the Federal Gazette.While other leading accounting firms have already published their annual accounts, that of EY is still a long time coming.

“Some partners fear closer integration would force partners outside Germany to share the bill for possible fines, lawsuits or client losses”, says the article of Financial Times. The development of this company, one of the leading auditing firms, is relevant for credit rating agencies, as the continuing losses and the depletion of equity could increase the moral hazard.

Credit ratings can only be as good as the data on which they are based. If auditor’s reports were issued that would not have been issued under normal circumstances with a good equity base and satisfactory profit situation at the auditing company, this would also lead to wrong conclusions at the rating agencies.

people near grocer store inside building

Court Ruling Makes Rating Difficult To Assess


Tesco and other UK grocers are affected.

On June 3, 2021, the Court of Justice of the European Union (ECJ) ruled that the provisions in EU law relating to comparability between two different roles based in different establishments, but within one organisation, do apply directly to private businesses in the UK and can be advanced under European and UK law. Moody’s comments on a decision which was prompted by the “equal pay” claims of around 6,000 former and current Tesco Plc employees and allows claimants to compare the value of their work to that of their colleagues in Tesco’s distribution centres.

“Assuming that Tesco could be forced to pay compensation and increase the pay of each of its 250,000 store workers by £10,000-£20,000 a year,” says Moody’s, “the implied increase in annual wages could be £2.5-£5.0 billion.” Such an amount could more than halve or even exceed Moody’s forecast of Tesco’s £4.2 billion Moody’s-adjusted EBITDA over the next 12-18 months.

“The company’s Baa3 rating and the stable outlook do not factor in any significant cash outflow related to the equal pay claims”, warns Moody’s. “Tesco has made no provision in its accounts on the basis that any potential liability is not considered probable by the company’s directors. Tesco’s leverage, measured in terms of Moody’s-adjusted gross debt to EBITDA, was around 4.4x in fiscal 2021 (ended 27 February) and we expect it will improve to around 3.8x within the next 12-18 months, compared to leverage guidance of 3.75x-4.5x for the Baa3 rating.”

Tesco’s rating is also by the other leading agencies, S&P’s and Fitch Ratings, just a notch above the speculative grades. Whether the company’s liabilities slide into the speculative realm depends on the behavior of the courts. The observation of the rating must therefore start here:

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Credit Rating Effects of the Global Minimum Tax


G7 Finance Ministers’ communiqué will most likely not bring any credit rating improvements for multinational corporations.

“We strongly support the efforts underway through the G20/OECD Inclusive Framework”, says the Finance Ministers and Central Bank Governors of the G7’s Communiqué, “to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.”

So far there are only a few details: “We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises. We will provide for appropriate coordination between the application of the new international tax rules and the removal of all Digital Services Taxes, and other relevant similar measures, on all companies. We also commit to a global minimum tax of at least 15% on a country by country basis.”

With a view to the federal election in Germany and the responsibility of the Federal Minister of Finance, who is also the candidate for chancellor of what is currently the third largest party in Germany, the planned date for the implementation of the project should fall during the German election campaign phase: “We agree on the importance of progressing agreement in parallel on both Pillars and look forward to reaching an agreement at the July meeting of G20 Finance Ministers and Central Bank Governors.”

Higher tax revenues are among the hoped-for short-term benefits for the governments involved. For countries like the Federal Republic of Germany, the question arises whether there is an overall economic advantage, since Germany is one of the strongest exporting nations a large part of the added value of German companies is achieved abroad. Since the planned tax particularly affects the largest corporations, especially the technology groups, which are also monitored by the international rating agencies, the consequences for the current ratings must be analyzed. The new tax could change the structure of capital allocation as well as the legal structures.

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The following infographic uses OECD data to show the basic central government statutory (flat or top marginal) corporate income tax rate in a selection of countries. 

Infographic: Global Corporation Tax Levels In Perspective | Statista You will find more infographics at Statista
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Drawing Investors From More Than 100 Countries


Mintos introduced a new lending companies evaluation model, Mintos Risk Score.

At the onset of the COVID-19 pandemic, many existing investors at Mintos, one of Europe’s leading alternative investment platform for investing in loans, decided to abruptly halt or reduce their investing activity while they waited for a clearer economic outlook, writes AS Mintos Marketplace, a joint stock company registered in the Commercial Register of the Republic of Latvia: “Furthermore, the global downturn in 2020 led to a sharp increase in underperforming loans, many of which eventually ended up delinquent. Mintos was quick to react by creating and expanding teams within the company dedicated to loan recovery.”

“Despite these challenges,” reports Mintos CEO and co-founder Martins Sulte, “over 80% of the total funded portfolio sustained their strong performance and delivered a total €53.3 million in interest earnings to investors. This shows a significant increase of 18.9% when compared to the €45 million earned in 2019.”

In 2020, 128,380 new users joined Mintos, bringing the platform to a total number of 369,332 investors from 105 countries. And with an addition of €1.6 billion in loans funded in 2020, the cumulative volume of funded loans grew by 37.2% to reach €5.9 billion.

Despite market ups and downs, the Mintos team focused on continuous service improvements. In January a new lending companies evaluation model was introduced – Mintos Risk Score. To help investors make informed decisions about investing in loans, Mintos expresses findings with the Mintos Risk Score. The Mintos Risk Score is calculated from 4 subscores that they assign for the company’s loan portfolio performance, the efficiency of loan servicing, buyback strength, and legal setup between the lending company and Mintos.

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Management Board of the Auditing Association of German Banks​​ Changing


Former colleague of the later Greensill Bank Supervisory board member has left

The Federal Association of German Banks (BdB) is drawing initial conclusions from the Greensill Bank‘s 3 billion euro compensation case. As the organization confirmed on request of the Börsen-Zeitung, it will analyze the structure of its auditing association and its staff with the help of consulting firms in the coming months. The aim is to reorganize the auditing association’s risk management system and develop its staff in such a way that a case like Greensill is not repeated. Bank President Hans-Walter Peters informed the staff of the auditing association about this, reports Börsen-Zeitung.

The reform announced by BdB President Peters, which also aims to digitize the auditing association, is likely to cost the association a single-digit million amount. ZEB and Deloitte are to advise the organization on developing a target image for a more agile auditing association, while headhunter Egon Zehnder will support them in personnel development and acquisition. First results are expected in early autumn.

A personnel change has already been determined, says Börsen-Zeitung: Manfred Kühnle, spokesman for the board of the 160-person auditing association, will probably take his hat around mid-month, it said. Internally, he has already said goodbye to employees, as can be heard. Hans-Dieter Bienen, who is changing from Deloitte, will initially take up his post on an interim basis.

Manfred Kühnle is an auditor by profession: 1983 – 1985 training as a banker, 1985 – 1986 military service, 1986 – 1992 study of business administration at the Friedrich-Alexander-Universität Erlangen-Nürnberg (Dipl. Kfm.), 1992 – 2002 PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main (1997 tax consultant exam, 1999 auditor exam, 2001 Certified Public Accountant) and from 2003 Auditing Association of German Banks, Cologne (member of the board since 2004, spokesman for the board since 2009).

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Investment Grade Møller Mobility

Read, Reports

Møller Mobility thrives in symbiosis with Volkswagen.

Nordic Credit Rating (NCR) assigned a ‘BBB-‘ (that reads triple B minus) long-term issuer rating to Norway-based car importer and retailer Møller Mobility Group AS (Møller Mobility). The rating agency’s outlook for this credit rating is stable. At the same time NCR assigned an ‘N-1+’ (that reads N One plus) short-term issuer rating. NCR has also assigned ‘BBB-‘ (triple B minus) issue ratings to Møller Mobility’s senior unsecured bonds.

Nordic Credit Rating was established as a financial infrastructure company by 30 Nordic banks and institutions to lower the threshold for issuers to obtain and maintain a credit rating. Being registered with European Securities Markets Authority as a credit rating agency, their research is produced by an analytical team and is based on local expertise.

“The long-term rating reflects the company’s strong position in its core market. It is further supported by the company’s close relationship over almost 75 years with car manufacturer Volkswagen AG, which provides scale and diversification through a range of brands, and the joint venture Volkswagen Møller Car Finance. The rating is also underpinned by the company’s moderate financial leverage and strong cash position, supported by unutilised credit facilities”, is the rating agency’s rationale for this rating.

According to NCR, the rating is constrained by the company’s operating environment. It is a cyclical industry undergoing rapid change through the development of low-emissions vehicles, which could potentially affect the industry’s structure. “The company’s large off-balance-sheet repurchase portfolio, with a maturity profile of less than two years, could materially affect the company’s short-term liquidity and potentially result in losses should the market experience rapid deterioration”, warns NCR.

“The stable outlook reflects our expectation that Møller Mobility will maintain its market-leading position in its geographical segments and benefit from an economic recovery on the back of increased vaccination against COVID-19 and the easing of pandemic-related restrictions by mid-2021 in its core markets. It also reflects our expectation that Volkswagen will continue to deliver popular models of cars in a timely matter”, says NCR.

The rating agency sets the following standards for improving the rating (see also the Full Rating Report:

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After S&P Global, Also Moody’s on Fortune 500


The two leading rating agencies in the world are among the 500 largest companies in the USA.

Anyone who thinks the rating agencies industry is a marginal issue should study the Fortune 500 list. Moody’s Corporation has been named to the Fortune 500 for the first time, reflecting the strength and momentum of its strategy as a global integrated risk assessment firm and the resilience of its global employee base.

The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. The name of the Fortune 500 ranking is synonymous with business success. Now there is the 67th edition of the ranking of America’s largest companies. Together, the 500 corporations on this year’s list generated $13.8 trillion in revenue, or some two-thirds of the U.S. economy.

When Gabler Verlag published the first book in German on the subject of “Credit Rating by International Agencies” exactly 30 years ago, hardly anyone would have thought that a relatively small organization of analysts would make it into this prestigious ranking. The book by Gabler Verlag was based on the publication of the first doctoral thesis in German on this topic. A central theme of this book was the controversial forecast that the two leading rating agencies Moody’s and Standard & Poor’s would gain in importance worldwide. What was a controversial prognosis at the time is a provable fact today.

“Moody’s achieved record revenue growth in 2020, in part because we never wavered in our support for each other and because we stayed focused on providing expertise to our customers when they needed it most,” said Rob Fauber, President & CEO of Moody’s. “Our inclusion in the Fortune 500 recognizes the contribution of our employees in achieving these results – even during challenging times – and I am deeply grateful for their dedication.”

Moody’s generated $5.4 billion in revenue in 2020, due in large part to strong market demand for Moody’s data, analytics, and trusted insights during the COVID-19 pandemic. Recognition in the Fortune 500 reflects the clarity of Moody’s strategic direction and its growth during a period of unprecedented market turbulence.

Building on the heritage of the rating agency, Moody’s Investors Service, in 2007 Moody’s launched Moody’s Analytics to further build the firm’s data and analytical capabilities, serving a broader range of customers to help them make better decisions about a wider range of risks.

While Moody’s made it onto this list of success for the first time, competitor S&P Global is already on a higher rank. Dealing in financial information and analytics, S&P Global is the parent company of subsidiaries such as S&P Global Ratings and S&P Global Market Intelligence. The company also owns a majority stake in the S&P Dow Jones Indices. Therefore, these two companies on the Fortune 500 list are not fully comparable. Moody’s rank is 500, S&P Global’s rank is 393.

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Automation Of The Guarantee And Deposit Processes


E-Cautio, a Luxembourg-based InsurTech company and provider of Platform-as-a-Service (PaaS) solutions, announced its new partnership with SCHUMANN.

In the future, E-Cautio will use the CAM Surety software from SCHUMANN, the technology provider in the areas of credit and guarantee insurance. With CAM Surety, a SaaS solution, E-Cautio enables small and medium-sized companies to remain competitive by digitizing the entire process of guarantees and deposits and to offer guarantee insurance as a SaaS solution.

By automating the entire process of warranties and sureties such as performance guarantees or completion guarantees, small and medium-sized enterprises in Luxembourg and the rest of Europe accelerate their digital transformation. “They significantly improve the quality and efficiency of their operations, while at the same time reducing the risk of human error. In addition, the digital process includes customer onboarding, KYC, risk analysis, customer and claims management”, says a press release of SCHUMANN.

The new strategic partnership combines the CAM Surety software from SCHUMANN with the market expertise of E-Cautio. Small and medium-sized businesses – from MGAs (Managing General Agents) to insurance brokers to insurance companies and banks can be equipped with efficient, state-of-the-art technology tools. In a sector that demands ever more operational agility and efficiency, companies are supported to be innovative and to grow.