Moody’s Investors Service is seeking comments on its proposal to introduce a new counterparty risk rating for financial market players, the credit rating agency announced Thursday.
The proposed new metric would represent the agancy’s opinion on the likelihood of a default and the expected financial loss suffered if a default happens.
Moody’s would initially assign ratings to banks, the agency says in a news release, and non-banks would be assigned a rating on request.
The new rating would be distinct from ratings assigned to debt instruments, issuer ratings, and Moody’s existing counterparty risk assessments, which are opinions on the likelihood of a default on certain senior operating obligations.
The risk rating would consider the intrinsic strength of the issuer, the potential for support from either an affiliate or the government, and the relative seniority of these obligations within its capital structure, Moody’s says.
The proposal is out for comment until March 23.