The Pakistan Credit Rating Agency Limited

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Rating Methodologies

PACRA has developed specific rating methodologies for each business segment falling under the PACRA's rating universe. Rating methodologies are developed to incorporate varying risk factors of different economic sectors. While ratings are not calculative in nature, these methodologies form the basis of risk analysis conducted at PACRA that help rating committee to reach at the final rating opinion. These methodogies cover material risk factors, both qualitative and quantitaive, affecting the profile of the ratees in general. Specific issues are usually discussed in individual rating reports. PACRA's rating committee reviews the criteria and rating methodologies to keep up the dymanism of analytical process at all points in time.

Bank Rating Corporate Rating Insurance Rating

To arrive at a tenable rating of bank’s credit worthiness, the basic precept of our rating method is that we should get to understand the business of the bank in question (and the risks inherent to this business), the objectives of its management, the environment it operates in and the most likely future development of its business.....Details

PACRA’s framework for assessing credit quality makes use of both qualitative and quantitative analyses to assess the business and financial risks of the corporate entity. Ratings are an assessment of the entity’s capacity and willingness to service financial obligations in a timely manner and are intended to be comparable across industry groups.....Details

Insurer Financial Strength (IFS) rating of a non-life insurer assesses the financial strength of the company and its capacity to meet obligations to policyholders on a timely basis. The financial strength rating is assigned to the company itself, and no liabilities or obligations of the insurer are specifically rated unless otherwise stated.....Details

Structured Finance Rating Asset Manager Rating Project Grading

Securitization is a financing tool. While securitization structures can vary significantly, in general, the investor in an asset-backed security is entitled to receive a pass through of the timely payment of profit and principal on the pooled assets. The investor, therefore, looks to the cash flow from the purchased assets for repayment.....Details

To help investors better understand asset management structures, PACRA has developed a rating methodology intended specifically to provide clear indicators of their capabilities. The agency has selected criteria to measure an asset manager’s qualifications and prospective capabilities to address the explicit concerns and interests of investors.....Details

Credibility of developers and the reliability of completing projects on time and without cost overruns are important factors for both lenders and investors. What could provide a degree of comfort to them? This factor has prompted PACRA to launch a system of grading real estate developers and projects.....Details

Mortgage Backed Securities Bank Loan and Recovery Rating Power Producing Companies Rating

MBS rating criteria concentrates on the credit quality of the loans and related security, structural features of the transaction including the transaction's cash flows, tranching etc. and legal aspects of the transaction. PACRA assesses the interaction of these areas and tests the robustness of an MBS transaction.....Details

Bank loan and recovery rating is a concept paper, which focuses on both the risk of default and liklihood of ultimate recovery in the event of default. It is on the same familiar 'AAA' through 'C' standard rating scale, but, additionally, factors in the likely recovery in a post-default situation.....Details

PACRA's rating criteria for IPPs concentrates upon three main areas, namely, the unique contractual framework of an IPP, the legal aspects of the regulatory structure embodied in project agreements, and the IPP's position in its lifecycle at the time of finalizing the rating opinion.....Details

Mutual Fund Ranking Fund Stability Rating Capital Protection Rating

The ranking methodology is designed in a manner that the star ranking of a fund conveys a sense of how skillfully the fund has been managed; that is, the relative star ranking of two funds in a category should be affected more by manager skill than by market circumstances or events that lie beyond the fund managers' control.....Details

The fund stability rating is the latest addition to PACRA's rating spectrum. It provides investors with an objective measure as to the main areas of risk to which the income funds are exposed, that is credit risk, liquidity risk, and interest rate risk.....Details

The capital protection rating is an opinion on the prospective relative certainty of protection of the original investment. These ratings indicate the degree of certainty regarding timely payment of the original investment on maturity of the scheme. However, the rating does not comment on the relative performance of these schemes in terms of returns offered to investors.....Details

Holding Companies (HOLDCO)

The need for a separate framework for assessing credit quality of Holding Companies (Holdco) arises as a substantial amount of risk and rewards of a holdco emanates from its “investments” in subsidiaries & associated companies. These “investments” have been built in order to capitalize on opportunities and/or to diversify risk......Details