Banks Ratings

If you decide to invest your deposits in a foreign bank - even though your deposits are guaranteed up to 100,000€ by the European mechanism- you should be concerned about the bank’s sustainability.

Government and corporate credit bonds are rated by credit rating agencies such as Standards and Poors (S&P), Moody’s or Fitch. But these ratings can be confusing to the uninitiated. Here’s all the information you need to figure out which banks you can trust with your money.

Look at the credit bond rating of the bank

To finance themselves, states and companies can issue credit bonds. These bonds are rated by rating agencies to inform investors about the risk that the issuer won’t be able to pay the return.

Each rating corresponds a level of risk on a scale from AAA (meaning “the obligor's capacity to meet its financial commitment on the obligation is extremely strong”) to D (meaning “In default”).

Depositors are considered as creditors of the bank. So the credit rating of the bank applies to the rating of the deposit’s security.

However, depositors are not normal creditors since the EU directive obliges every member state to have a Depositor Compensation Scheme, which covers all deposits up to 100 000 € by depositor, by bank.

What is the maximum rating for a bank?

Bank ratings can’t exceed the rating of the country where they are domiciled because government bonds represent the lowest risk of financial investment. Indeed, a state is, in principle, immortal, unlike a company.

Government bonds serve as a basis for other bonds: as government bonds are the least risky investments, other bonds, like company bonds are calculated as the government bond rating plus a risk premium.

For example, Poland is rated A- by Fitch, so the Polishbank Citi Handlowy, also rated A-, has the highest rating possible.

Credit rating scale

As the 3 most common rating agencies use different scales, we propose the following table of equivalence: