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Smith's Bank GradingsSMITH's Bank Gradings

 

SMITH’s Grading scale provides a comprehensive and unified credit comparison that is consistently applied for all securities — from supranational organizations and sovereign risk gradings to sub-sovereign municipal entities and corporate credit analytics.   It’s a principled and proven approach to credit analysis expressed on Smith’s universal scale.

 

Smith’s Bank Gradings have played a central role in our comprehensive grading of credit across borders and industry sectors since 1994. While corporate bank grading cannot be higher than the Smith’s sovereign debt grading where the bank is domiciled, supranational bInformation about Smith's Gradingsanking organizations can have debt gradings that are significantly more creditworthy.

Smith’s Global Bank Gradings are at the forefront of credit analysis of long-term depositor protection, bondholder repayment, and systemic risk immunization.

Smith’s U.S. Bank Gradings includes special sub-sectors, such as state-chartered banks and nationally-chartered banks. Smith’s Research found a strong correlation between the creditworthiness of state-chartered banks and corresponding state and local municipalities. However, the Tax-Reform Act of 1986, effectively severed this connection for large “money-center” banks and the major metro areas where these institutions resided.

In 1994, Smith’s Bank Gradings tracked credit quality of U.S. Banks and noted the rolling of Mexico’s lesser-developed country bank debt and the “peso crisis”. Eventually, the U.S. government intervened and created “Brady Bonds” to allow Mexico to exit the bank debt without causing losses to U.S. Banks. The Mexican Peso Crisis prompted Smith’s Bank Gradings to look at the role of systemic risk in the banking system and the implementation of cross-border solutions.

Since 1992, SMITH’s Gradings is a time-tested and performance-proven process. SMITH’s Research & Gradings exceeds the standards of the world’s central banks and financial regulatory authorities. SMITH’s Gradings has nearly 2 decades of default and recovery experience.

SMITH’s Credit Grading System has three components: 1.) long-term ability to make timely debt service payments; 2.) recovery/residual value; 3.) event risk.

SMITH's Research & Gradings provides Flash Reports utilizing Smith's Grading scale. SMITH's Flash Reports are descriptive and summary in nature.

SMITH's Research & Gradings can also produce full compliance reports, distressed gradings reports, portfolio gradings and customized credit reviews for board level requests. Flash Reports are descriptive and summary in nature, featuring key credit factors, security provisions and SMITH's Grading. The Credit Reports are comprehensive in scope and provide a credit rationale for SMITH's Grading.

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Smith's Repayment Grading Smith's Recovery Grading Smith's Event Risk Grading
SMITH's Repayment Grading

The likelihood of repayment of a debt begins with the location of the borrower, which can directly impact its ability and willingness to make payments.

The nature and durability of the underlying revenues associated with structured financings and revenue bonds is based on a wide range information that is gathered in intricately detailed interrogations of complex databases. What’s more, Smith’s Gradings reflect absolute levels of default risk, rather than relative financial strength ratings.

Think of Smith’s Gradings as providing you with a bridge to safety based on the absolute high water mark rather than on, say, the median water level over the past three years. Smith’s Repayment Gradings range from 135 (Best) to 0 (Worst).

SMITH's Recovery Grading

If a bond does default, then Smith's Recovery Gradings provide investors with an assessment of the recoveries based on the rights and remedies in the bond documents as well as the type of bankruptcy filing.

Smith's Recovery Gradings range from 10 (full recovery) to 0 (Nothing) so look to see if your investment might provide you with a cushion if it falls from grace.

SMITH's Event Risk Grading

Event Risk are factors that can be present but may be episodic in frequency and indeterminate in duration. Bankruptcy, Earthquakes, Floods, Hurricanes and other events can impact the repayment and recovery associated with any investment. Smith’s Event Risk Gradings reflect not only an ongoing event, but also could indicate a material threat. For example, Smith’s Event Risk Gradings found a hospital was going to be built at the base of a 150 year old wooden dam. We found the technology for a municipal sludge pelletization plant was not adequately tested. And, we questioned the economic merits of deink pulp plants.




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