Financial Institutions: Securities Firm Global Rating Methodology

Executive Summary

This rating methodology describes the key risk factors that Kroll Bond Rating Agency, LLC and its rating affiliates (collectively, “KBRA”) consider when assigning ratings to securities firms and associated holding companies. The scope of this framework extends from institutions focused on specific areas of the securities market to full-service firms encompassing wealth management, securities underwriting, brokerage, advisory, trading and lending activities.

The rating determinants include both qualitative and quantitative financial risk indicators. Qualitative determinants include assessments of a firm’s market positioning and viability of a firm’s business model, business risk management, as well as economic and operating environment. Quantitative financial risk indicators include financial metrics, financial trends, other financial data, and may incorporate stress testing. KBRA typically assigns a higher overall weight to qualitative factors given the importance of…