Our Issuer & Counterparty Scorecards: for external use
In addition to using our Scorecards internally, we publish them to provide transparency of our internal approach – and to support professional advisers in their research and due diligence responsibilities: but it is important that professional advisers who want to use them take the time to look at the background information that introduces them and explains ‘what they are, and what they are not’.
Professional advisers are expected to undertake robust issuer / counterparty due diligence. The regulatory expectations upon professional advisers are explicit. The following extracts are taken from the FCA Retail Product Development and Governance: Structured Product Review, 2012 Thematic Review:
‘‘Firms should carry out sufficient due diligence into the counterparty and not rely solely on credit rating agencies …’’
‘‘We expect firms to look more broadly than just the credit rating, such as the rating, outlook, credit default swap (CDS) spreads and other market information, as well as ‘fundamentals’ on the issuer’s balance sheet.’’
Our Scorecards are therefore important. They provide single-point access to multiple, widely recognised indicators of financial strength / credit risk, and can provoke and support detailed and more objective analysis, assessment, comparison, consideration and understanding of prospective issuers and counterparties.
Our Scorecards were developed for internal purposes, with weightings that reflect our views of the relative importance of the factors and categories in assessing and considering issuer / counterparty financial strength. If professional advisers have different views and / or want to apply or explore different weightings, we can readily support this.