ARC Ratings Publishes updated Foreign and Local Currency Ceilings Methodology

London, 29 May 2020 - ARC Ratings, S.A. (“ARC”) has published its updated Criteria for Assessing Country Ceilings (“the Criteria”) following internal review. This Criteria report is an update to the version published in May 2019 with no significant changes and therefore no rating impact. This methodology can be accessed at

The Criteria summarise how ARC assesses country credit risk for both local currency and foreign currency issuance in a country. ARC’s local currency country ceiling caps the highest rating that an issuer can receive in local currency in that country, except in the event a transaction is specifically structured to ameliorate relevant risks. The local currency country ceiling is the purest measure of country risk, as it strips out the role of external financial flows into and out of a country. ARC’s foreign currency country ceiling reflects transfer and convertibility risks, and also serves as a cap for the highest rating which can be accorded in a country in foreign currency.

A rating panel is assembled for each individual issuer to assess its fundamental credit profile. A determination is made on whether the issuer is immunized to the events that impact sovereign risk (a government’s credit rating in either local or foreign currency), and if so whether it can fall in the range between the relevant ceiling and the sovereign rating.

ARC is not currently assigning sovereign ratings and consequently also not assigning country ceilings. The approach the agency is taking in this situation is to use as reference for its rating assignments, when necessary, the second best local or foreign currency ceiling, as the case demands, assigned by the set of credit rating agencies considered relevant by the rating panel.

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