Credit Benchmark Grows Bank Contributors, Eyes Non-Bank Credit Data

London-based consensus credit ratings provider Credit Benchmark is expanding its network of banks that contribute proprietary ratings, and is planning to start collecting ratings from other companies that are subject to counterparty credit risk and compile their own ratings.

Credit Benchmark CEO William Haney says that in addition to the 26 banks currently submitting their own ratings to the vendor and consuming the average of the ratings that it produces, another nine banks are waiting to join—and are going through the internal legal and compliance onboarding requirements, which Haney says can take between six and 18 months, depending on each bank’s internal procedures—and the vendor is in discussions with more, with a target of bank 50 contributors by the end of 2019.

But the vendor is also planning to expand its coverage further by collecting ratings from other types of financial firms.

“To date, we’ve been focused on banks as providers of probability of default data. But we’ve found that other companies also do this—for example, insurance companies. They have people who’ve come from the banks and are very sophisticated. So we’re in discussions about creating a dataset of ratings from insurance companies, as well as exchanges and clearing counterparties… so we will quickly no longer be focused only on banks, but will be focused on credit quality more broadly, and within six to nine months, we’ll have non-bank contributors” Haney says.

This new data could be offered as a standalone dataset for each sector of contributors, but could also be co-mingled with Credit Benchmark’s existing bank data to create a more comprehensive, blended dataset, Haney says.

In addition to expanding its base of contributors, Credit Benchmark is also looking at ways to grow its consumer numbers.

“We’re trying to get banks to tell us where else within their firms they use that information, outside of corporate credit risk. For example, almost everybody at a bank does some degree of counterparty credit analysis… from lending and securitization to onboarding new customers and building pricing models,” Haney says. “A bank might have a lot of relationships and exposures to private companies that don’t have a rating, or to funds that will never have a rating.”

Credit Benchmark publishes almost 21,000 ratings on corporate, sovereign, public and private entities—rather than individual bonds—and funds, as well as other institutions and intermediaries, where it receives three or more contributions. Haney says the advantages of creating consensus ratings based on firms’ proprietary ratings are that the service brings transparency to unrated entities where there are limited overlaps in coverage with big credit ratings agencies, and that its ratings provide a more timely reflection of banks’ credit analysis.