FITCH RATING

In terms of structure and accessibility, Fitch’s sovereign rating methodology is arguably one of the easiest to understand. Claims against Fitch as not being the most transparent methodology refer to the lack of reference to data sources that they utilise to consider the varying categories. Nevertheless, the methodology document that is available online via registration, but also available here - contains an array of helpful information relating to understanding their methodological processes. 

The rating methodology is essentially divided into two components: the Sovereign Rating Model (SRM) and the Qualitative Overlay (QO). The rationale is essentially splitting between the quantitative and the qualitative elements .  

The QO carries the prospect of changing the resultant ‘notches’ derived from the quantitative analysis by two notches either way in each category, and then by three either way overall. There are weightings attached to each category for the SRM (quantitative) elements.  Such scores are attached to rating boundaries, like the other credit rating agencies’ methodologies. 

It is the combination of the above which can allow the analyst to come to a final score for the sector. After combining them all the analyst can then proceed to add anything else needed before convening a rating committee and sending their rating for deliberation.  

Fitch also helpfully provide an indication of what they determine a default to look like, which is helpful as a default can happen in a number of ways. The other agencies do provide their understanding of what a default is and when it may occur, but it is not attached within their sovereign rating methodologies. 

Fitch does provide some information on the information it considers, as well as its take on the integration and implication of ESG factors, but both are buried in the appendices and do not provide any real tangible information.