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The CR assessments, as they are commonly known, are part of Moody's updating its methodologies for rating banks worldwide.
Moody’s describes the CR assessments as “an opinion of the counterparty risk related to a bank's covered bonds, contractual performance obligations (servicing), derivatives (e.g., swaps), letters of credit, guarantees and liquidity facilities".
“CR Assessments are opinions of how counterparty obligations are likely to be treated if a bank fails, and are distinct from debt ratings in that they: (1) consider only the risk of default rather than expected loss; and (2) apply to counterparty obligations and contractual commitments rather than debt instruments,” Moody's said.
The measures do not affect the credit ratings assigned to each of the banks, which remain stable.
While no specific findings for each bank were disclosed, the move may help to boost market confidence in the identification of bank risks.
As well as the big four banks and non-majors, those that are to be assigned CR Assessments by Moody’s include some of Australia’s leading customer-owned banks and building societies, such as Teachers Mutual Bank, QT Mutual Bank and Newcastle Permanent Building Society.