The Rating Process Manual: Issuers, Rated Entities and Project Debt

Transcription

1 Bulletin #: 2A(1) Corporate RPM The Rating Process Manual: Issuers, Rated Entities and Project Debt Effective Date: 16 August, 2010 Version: 6 Author: ORM To: All analysts employed within Corporates (including Leveraged Finance) (if an analyst has any question regarding this policy, the analyst shall address the question to his/her Group Head or the person designated by the Group Head as responsible for policies and procedures) Table of Contents I. Introduction: The Rating Process Manual (RPM)...2 II. III. Communications Protocol...3 Analytical Team...4 IV. Information Requirements...5 V. Methodology, Criteria and Model Development...6 VI. Other Inputs and Considerations in the Analytical Process...6 VII. Timing of the Committee...7 VIII. Committee Packages/Memos and Presentations...9 IX. The Committee Chair...11 X. Committee Membership and Voting...12 XI. XII. XIII. XIV. XV. XVI. Abbreviated Committees...13 Rating Withdrawals...14 Minute Sheets...15 Appealing a Rating Committee Decision Initial Steps...17 Timing of Appeal Committees...18 Appeal Committee Membership, Voting and Packages...18 XVII. Notification of Rating Decisions to IREs and Their Agents...22 XVIII. Issuer Review of Research Reports...23 XIX. Publication of RACs and Research Reports...23 XX. Ratings and Research on the Fitch Website...26 XXI. Communicating with the Media and Investors...26 XXII. File Maintenance and Recordkeeping

2 I. Introduction: The Rating Process Manual (RPM) Fitch is committed to providing the world s securities markets with objective, timely, independent and forwardlooking credit opinions. To meet this objective and to ensure a globally consistent approach in the conduct of its rating processes, all analytical staff are expected to comply with Fitch s Code of Conduct, Worldwide Confidentiality, Conflicts of Interest and Securities Trading Policy, Firewall Policy and all Bulletins, including this RPM. 1. The requirements contained in this RPM replace all previous requirements contained in all previous versions of the RPM and the Analyst Reference Guide (ARG) for Entities on a go-forward basis and do not have retroactive effect. This RPM takes precedence over any previous group-specific policies, other than those contained in other Bulletins subject to: With respect to RPM Section V, subsection A, peer review must be in compliance no later than 16 August With respect to RPM Section V, subsection A, annual criteria review must be in compliance no later than 16 August Until then Section V, subsection A of the RPM dated 1 January 2010 applies. With respect to RPM Section VII, subsection B, no. 1, annual rating reviews must be in compliance no later than 16 August Until then Section VII, subsection B of the RPM dated 1 January 2010 applies. 2. This RPM details the policies applicable to International and National1 ratings, Public and Private ratings, Credit Assessments and Rating Assessment Services. Analysts must refer to the Bulletin #7 Analytical Products Ratings, Assessments, Shadow Ratings, Credit Opinions and Scores and Bulletin #7A Questions and Answers and Templates Ratings, Assessments, Shadow Ratings, Credit Opinions and Scores for additional instruction relating to Shadow Ratings, Credit Opinions and Scores. 3. All analytical groups are expected to keep the requirements of Fitch s Code of Conduct, Worldwide Confidentiality, Conflicts of Interest and Securities Trading Policy, Firewall Policy and all Bulletins, including this RPM, in mind when drafting new criteria, methodologies or group-specific policies and procedures or reviewing existing criteria, methodologies or group-specific policies and procedures. 4. In the event that situations arise that are not covered by the RPM, any other Bulletin, or where the RPM specifies that the analytical group is responsible for developing policies, procedures or best practices to address a specific matter, it is the responsibility of the individual analytical group(s) involved to develop additional written policies and procedures to ensure consistent practices within and, where appropriate, across groups to address such situations. These additional policies and/or procedures must be approved by the appropriate Regional Group Head or his/her designee and added to the group s RPM addendum. 5. References to Group Heads made herein are listed in Bulletin #22 Global & Regional Group Heads. B. Exceptions to the RPM and other Internal Bulletins The RPM is designed to present minimum policy requirements and is based on a level of commonality shared among Fitch offices. It is recognized that circumstances may occasionally arise where a departure from the minimum requirements established in the RPM may be necessary. Such exceptions should be rare and must be 1 To the extent that the legal or regulatory requirements of any jurisdiction in which Fitch is located are inconsistent with any provision of this Policy, Fitch personnel located in such jurisdiction shall comply with the requirements of the local jurisdiction pursuant to procedures approved by the GMD responsible for the area or an individual designated by the GMD to make decisions under this Policy (the Designated Person ). The head of Fitch s office in such jurisdiction shall record such procedures in the files of the office and notify the Legal Department and group heads of their contents. 2

3 approved by the relevant Group Managing Director, except in cases where an alternative member of management is specified in Fitch s Code of Conduct, the RPM or the relevant Bulletin. 1. No exceptions to the RPM or any other internal Bulletin may conflict with Fitch s Code of Conduct, Worldwide Confidentiality, Conflicts of Interest and Securities Trading Policy or Firewall Policy without the prior approval of any of Fitch s Chief Executive Officer, his/her designee, and/or President, his/her designee, and/or any Group Managing Director who reports directly to the Chief Executive Officer or President. Fitch s Chief Executive Officer, his/her designee, and/or President, his/her designee, and/or any Group Managing Director who reports directly to the Chief Executive Officer or President shall also have responsibility for interpreting the aforementioned policies. 2. Notification of all approved policy exceptions both general and specific must be sent to the Lotus Notes Exception Log mailbox so that they may be tracked in a common, central location. All general exceptions will be recorded in Fitch s Policies and Procedures Exception Log. 3. Exceptions that are specific to a single Issuer or Rated Entity (IRE) or transaction, including one-off exceptions, must be recorded in the relevant issuer or transaction file (for example, within the relevant minute sheet, where appropriate, or as a stand-alone record) or within an appropriate front-end system such as the Corporate Finance Work Center or PFStar. All such records must be maintained permanently. II. Communications Protocol All internal and external, oral and written, communication must be professional and appropriate at all times. 1. Analysts must ensure that their message is clear and easy to understand. Euphemisms and jargon not generally used in the capital markets or relevant industries should be avoided. Abbreviations or technical terms with which the typical reader may not be familiar should be explained. 2. Fitch assigns ratings based on established rating criteria; Fitch does not structure transactions or give corporate restructuring or policy advice to IREs or their agents. Similarly, Fitch does not comment on whether a given rating level may be desirable from the IRE s, its agent s or a market perspective. Analysts must employ language reflective of these distinctions at all times and must avoid using language that could give a misleading impression of Fitch s role in the financial services industry. Further instruction is provided in the Bulletin #27 Restrictions on Advising Issuers and Others. 3. Fitch shall not refuse to issue a credit rating of an entity or financial instrument because a portion of the underlying assets has been previously rated by another Credit Rating Agency. 4. To reinforce the independent and professional nature of all analytical interaction with IREs and their agents, analysts must always refer to IREs as rated entities or issuers and not as clients or customers. Subscribers to Fitch s website research and services must be referenced as subscribers. If an IRE is also a subscriber, it must still be referenced as a rated entity or an issuer by analysts in all analytical documentation and correspondence. 5. Under no circumstances may analysts refer to any unpublished ratings of another Credit Rating Agency (for example work-in-progress ratings, preliminary ratings, private ratings or shadow ratings) during analytical discussions as reports or rumors of such non-public ratings may not be accurate or include all relevant conditionality. 6. If an IRE, its agent, or any third party indicates that it is contemplating taking legal action against Fitch, the Legal Group must be notified immediately. All subsequent relevant communication by Fitch must be discussed in advance with the Legal Group. B. Initiation Status and Commercial Aspects of Rating Relationships The initiation status of a rating refers to whether the rating was requested by an IRE, its agent, or a third party or initiated by Fitch or its predecessor agencies. The initiation status and all commercial aspects of a rating relationship 3

4 have no bearing on analytical judgment, the frequency or quality of rating reviews, rating dissemination policies, confidentiality or any other policy related to assigning or maintaining a rating. 1. All discussions with issuers and intermediaries concerning rating fees and fee arrangements must be handled by members of the Business Relationship Management Group [BRM]. In the event that an issuer or its agent raises an issue concerning fees with an analyst, this inquiry must be referred to a member of BRM immediately. Further instruction is provided in the Bulletin #4 Policy on Business and Relationship Management. 2. Access to and dissemination of detailed fee information (at the issuer and transaction level) is limited to appropriate members of BRM, Fitch s finance and accounting staff and, if requested, members of the Legal and Compliance Groups. Receipt of group-level financial information including revenues, P&L and market share data is limited to Group Managing Directors and Regional Group Heads that are Managing Directors within the analytical teams, appropriate members of BRM and, if requested, members of the Legal and Compliance Groups. Further instruction is provided in the Bulletin #4 Policy on Business and Relationship Management. 3. There must be no references to any commercial aspect of Fitch s relationship with an IRE during any analytical discussions, including rating committee discussions. Such references must not be included in analytical files (other than disclosures regarding initiation status that appear in Rating Action Commentaries [RACs] in accordance with the Bulletin #14 Rating Initiation and Participation Disclosure Policy. 4. All inquiries from third parties concerning commercial or regulatory aspects of Fitch s business must be referred to the Media Group or to another individual authorized to discuss such matters under the Bulletin #5 Media Policy. III. Analytical Team A. Primary, Secondary and Performance Analysts At the start of the rating process, both a primary analyst and a secondary analyst must be assigned to each IRE or transaction. This team is responsible for completing the analysis necessary to bring the rating to committee and for the ongoing monitoring of the rating, except for point-in-time ratings or where monitoring responsibility has been transferred from one or both of these analysts to one or more dedicated performance analysts. 1. New analysts must not be involved in the rating of transactions originated or arranged by their previous employer for a minimum of six months. At no time may analysts participate in rating committees or contribute in any way to analytical work relating to securities of an IRE or transaction that they or their immediate family own. Analysts must refer to Fitch s Bulletin #13 Worldwide Confidentiality, Conflicts of Interest and Securities Trading Policy for additional instruction on when a recusal from all analytical discussions on an IRE or transaction is required. 2. Analysts who have resigned from Fitch and are serving out their notice period should not participate in preliminary discussions, rating visits, rating committees or any other situation that may cause them to learn new confidential information relating to IREs and transactions. However, it is noted that, particularly in regions with long notice periods and in cases of departures from small analytical teams and/or of senior analytical staff, exceptions may be necessary to accommodate legitimate handover needs. All such cases of participation must be approved in advance by the Managing Director responsible for the analytical team and decided on a case-bycase approach, which takes into account market practice in the region and the circumstances of an analyst s departure. These cases of participation must be logged as an exception per RPM Section I, subsection B, no Primary, secondary and performance analysts are subject to rotation requirements as described in the Bulletin #34 Rotation Policy. 4. Where an analyst leaves the analytical team for any reason or is rotated, his/her manager is responsible for promptly reassigning all of such analyst s analytical responsibilities to another member(s) of the team to ensure that all IRE and transaction ratings remain adequately monitored. Unless circumstances dictate otherwise (for example as a result of a sudden departure of the primary and/or secondary analyst) a handover meeting shall take place to ensure understanding of key rating drivers and continuity of file management. 4

5 Until the rating service is completed for Corporate Finance Centre (CFC) the manager of the analytical team must submit the changes to the Analyst Coverag box to update Fitch's databases and website. 5. Where an analyst leaves the employ of Fitch to work for an IRE that the analyst has been significantly involved in rating or a financial firm with which the analyst has had significant dealings as part of his/her duties at Fitch, the Global Group Head or his/her designee is responsible for organizing an Analytical Review Committee to review the previous work conducted by the analyst. Further instruction is provided in the Bulletin #24 Policy for Reviewing Work of Analyst Who Leaves Fitch to Work for an Issuer or Arranger. IV. Information Requirements Analysts must base their research and rating analysis on a thorough analysis of all information known to them and believed by them to be relevant to the analysis and the rating decision. This information includes publicly available information, information provided directly by the IRE and/or its agents, information provided by third parties and relevant information gathered by Fitch analysts during their interaction with other IREs and/or their agents. Where there is insufficient information to assign or maintain a rating, no rating shall be assigned or maintained. 1. All information, including confidential information, shall be shared internally on a reason to know basis. Thus, if an analyst receives information from an external source that they believe would be relevant to a rating maintained by another analyst, including one based in a different analytical group, he/she must pass that information to the appropriate analyst. 2. In the event that an analyst receives information from an external source on a confidential basis that is relevant to any IRE or transaction rated by Fitch (i.e. a tip ), he/she must follow the Bulletin #6 Protocol for Responding to Confidential Tips Related to Fitch Rated Entities. If the tip is relevant to another analytical group, the analyst s manager and the Legal Group must be contacted for further guidance on the most appropriate way to share this information. 3. Wherever an analyst feels that there is insufficient information to form an appropriate rating opinion of an IRE or a transaction, the analyst must notify his/her manager immediately. In cases where the analyst and/or his/her manager believe that the information currently available from all sources is below the necessary threshold to maintain a rating, a rating committee must be called to consider withdrawing the rating in accordance with RPM Section XII. B. Interaction with IREs and Their Agents Meetings and Information Requests Analytical review meetings or site visits that are held with the IRE and/or its agents and third parties form an integral part of the rating process. Analysts must ensure that their conduct is professional at all times and that all requests for information provided to IREs and their agents are appropriate, clear and comprehensive. 1. A minimum of two Fitch analysts must attend all analytical review meetings with the IRE and/or its agents and third parties, including all scheduled conference calls concerning material points, to ensure that a second record of all discussions that are relevant to the rating analysis is made and to minimize any potential for conflict of interest. 2. All requests for information provided to an IRE and/or its agents and third parties must be clearly phrased. Analysts should only request information and data that are relevant to the rating analysis. Where analysts can identify clearly periodic data items without which surveillance of the ratings will be impaired, they must specify clearly the information that Fitch would need to receive on a regular basis to monitor the rating appropriately after the issuance of the rating. 3. Where financial statements are included in the information requested, analysts should request audited versions that are prepared according to International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP) or US Governmental Accounting Standards Board (GASB). If such statements are not available, analysts must determine whether notes to the local GAAP, other statements 5

6 provided and published management comments provide adequate disclosure to make appropriate adjustments for comparative analysis. Where this is not the case, analysts must seek further information from the IRE. 4. If an IRE delays filing audited financial statements, if the financial statements are qualified by the auditor, if the auditor's opinion is withdrawn or if restatements or the requirement to restate are announced, analysts must determine the reasons for this situation and assess the impact on the quality and reliability of the information provided. It is possible to continue to rate an IRE that does not have audited financial statements, but in these circumstances, analysts must obtain the appropriate information that allows them to conclude that the information provided is adequate to form a basis for the rating. V. Methodology, Criteria and Model Development All methodologies, criteria and models are the responsibility of the individual analytical groups and must be reviewed and approved annually by the relevant criteria committee. In addition, all methodologies, criteria and models must be referred to a Peer Review committee for independent review at least every three years. 1. All new methodologies, criteria and models, as well as all significant revisions to methodologies, criteria and models, must be reviewed and approved by a Peer Review Committee as referenced in Bulletin #33 Fitch Ratings Process for Reviewing Existing, Updated and New Criteria, Models and Securities. 2. All existing methodologies, criteria and models must be reviewed and approved by the relevant Criteria Committee(s) annually to ensure that they remain up-to-date and relevant. The relevant Criteria Committee(s) is also responsible for reviewing and approving minor revisions to existing methodologies, criteria and models. 3. A Transaction Screening Committee is required to review the feasibility of rating a debt issue with a financial structure that is materially different from existing rated structures before such a debt issue is rated. Analysts should refer to the Bulletin #3 Transaction Screening Committees for further details. 4. Further instruction is provided in the criteria reports Bulletin #32 Guidelines for Developing and Revising Criteria and Bulletin #31 Criteria for Model Management. VI. Other Inputs and Considerations in the Analytical Process A. Background Checks In certain circumstances, Managing Directors may consider it appropriate to conduct a background check in connection with rating services provided by their groups. 1. In all cases where a Managing Director instructs that a background check be conducted, the primary or, in his/her absence, the secondary analyst must discuss the focus and the most appropriate method for conducting the check with the Managing Director. All background checks must be completed before the final rating committee. 2. Any background check that raises concerns must be reviewed by the Managing Director requesting the check, who shall then determine the most appropriate course of action. B. Transactions with No Fundamental Purpose Fitch does not rate transactions that exist solely for tax and/or accounting reasons and do not appear to have any fundamental economic purpose. 1. Transactions may be designed to be tax or accounting efficient. However, if analysts or their managers have concerns over the fundamental purpose of a transaction structure, it must be brought to the attention of the relevant Regional Group Head, Group Credit Officer or a Regional Credit Officer and the Legal Group. Further instruction is provided in the Bulletin #3A Economic Substance and Complexity. 6

7 C. Involvement of Other Analytical Groups During Analytical Process The primary and secondary analysts, or where relevant the performance analyst, in conjunction with their manager are responsible for assessing whether it is appropriate to seek input from other analytical groups. In all cases, where input is deemed useful ahead of the rating committee, the primary analyst is responsible for ensuring that crossgroup, including cross-region, discussions occur. 1. Analysts should refer to the Bulletin #7 Analytical Products Ratings, Assessments, Shadow Ratings, Credit Opinions and Scores for further details of which types of opinions are appropriate to support different types of ratings. 2. Where input from another analytical group is deemed relevant, the nature of any requested input must be explained clearly by the requesting analyst to ensure that the feedback received is appropriately detailed and that any supporting opinion provided is adequate for the intended purpose. 3. Where the opinion of one analytical group provides a central input into the analysis of another for example a sovereign or counterparty rating an appropriate representative of that analytical group must be invited to participate, in all relevant internal discussions, including rating committees, subject to no. 4 below. In cases where they are unable to attend a rating committee, they must be given the opportunity to provide feedback in advance. Any feedback provided that is relevant to the rating discussion must be shared with the committee members. 4. Where one rating is supported by another through credit enhancement, such that the ratings move in tandem, and the two entities are not otherwise closely credit-linked (for example, a bank LOC enhancing a municipal bond), it is not necessary to invite an appropriate analyst from the analytical group responsible for the supporting rating to discussions on the supported rating. D. Legal Analysis The analytical teams are responsible for working with the Legal Group to ensure that legal risks relevant to the rating analysis are identified. 1. Appropriate legal opinions must be sought from the IRE s legal counsel where deemed necessary by the relevant manager (for example, legal opinions may be necessary with regard to unusual and unfamiliar situations such as non-standard guarantees, complex intercompany relationships or legal defeasance). In all cases, these opinions must be reviewed by Fitch s Legal Group. 2. Analysts must ensure that the relevant opinions are provided to the Legal Group or local counsel with sufficient time for review. 3. Advice must also be sought from Fitch s Legal Group wherever deemed appropriate by the relevant Managing Director or Peer Review Committee chairperson during the drafting or review of special or criteria reports. E. Macroeconomic Conditions Review Fitch produces, on a periodic basis, a number of reports and presentations that examine current macroeconomic and financial market conditions that may have an impact on ratings. It is the responsibility of each Group Credit Officer to review such reports and to highlight to his or her applicable rating group any conditions he/she believes may affect the ratings of that group. Analysts must ensure that they consult with their Group Credit Officers, to the extent that the analysts deem necessary, about these macroeconomic conditions and incorporate them as necessary in their rating analysis. VII. Timing of the Committee A. New Ratings Ratings are assigned by a rating committee. Analytical groups that provide ratings on complex transactions must also hold preliminary committees where it is necessary or helpful to reach decisions on specific analytical 7

8 considerations earlier in the review process. Even where committees do not determine final rating levels, they must still be conducted in accordance with the same policy standards as all other committees. 1. In the event that dissemination of an initial rating is delayed beyond four weeks from the date of the conclusion of the committee, a further committee must be held prior to publication. Analysts should refer to RPM Section XI for instruction on whether an abbreviated committee is appropriate. A further full committee must also be held before publication in the event of credit developments that may have an impact on the rating within the four-week period. 2. Expected ratings are not conditional upon receipt of further analytical information. By the time an expected or preliminary rating is assigned to a transaction, no change should be anticipated to that opinion other than in exceptional circumstances. 3. A new committee must be held wherever a point-in-time opinion, such as a credit assessment, is converted to a monitored public rating. A new committee must also be held ahead of the publication of a previously private rating. Analysts should consult the Bulletin #7 Analytical Products Ratings, Assessments, Shadow Ratings, Credit Opinions and Scores for further details on these products. Analysts should refer to RPM Section XI for instruction on whether an abbreviated committee is appropriate. 4. A rating committee decision is required to assign ratings to a debt class (e.g. senior unsecured, junior subordinated) that currently is not rated by Fitch. This includes the rating of any program that allows for the issuance of multiple securities, such as shelf programs, other than renewals of previously rated programs. 5. Once a rating is determined for a given class of debt of an issuer or for any program that allows for the issuance of multiple debt securities, the same rating may be applied automatically to repeat issues that are issued under the same terms and conditions. In all such cases, it is the responsibility of the primary analyst or, in their absence, the secondary analyst to monitor that the cumulative amount of debt being issued and the maturity structure of the debt does not materially alter the risk profile of the issuer. Whenever the primary, or in their absence the secondary, analyst considers that the risk profile of the issuer has changed in a material way, they must promptly convene a committee to review all existing ratings. 6. Ratings assigned to forthcoming debt issues must be defined as expected ratings unless market convention for that sector is simply to assign a rating. Once the bond is issued, the expected rating must be replaced by the assignment of a final rating. Each analytical group is responsible for establishing a procedure by which this conversion is achieved. In cases where the bond is not issued, the expected rating must be withdrawn. Publishing will maintain a log of all published expected ratings that will track when such ratings convert to final ratings. On a monthly basis Publishing will inform the appropriate primary analyst of outstanding published expected ratings which are still outstanding at 90 days or more. Where appropriate the analytical group will withdraw the rating. 7. Ratings on debt instruments should be assigned to coincide with the launch of the issue where possible. B. Existing Ratings All ratings, except those explicitly designated as point-in-time ratings, must be monitored on an ongoing basis. Monitored ratings are also subject to annual reviews by a rating committee, subject to nos. 6 and 7 below. 1. Ratings are subject to annual reviews by a rating committee, but if a rating action appears warranted, analysts must promptly convene a committee to review the rating instead of waiting for the next annual review. 2. The primary or secondary (in the absence of the primary) analyst, together with his/her manager, is responsible for determining whether a credit event is of sufficient magnitude to warrant convening a rating committee in between annual committee reviews. In all cases where there is no agreement over whether a committee is warranted, a committee must be convened. 3. The timing of all rating committees must be determined by the relevant analytical team based on credit developments, including merger and acquisition activity, the receipt of material new information or the regular committee review timetable. The timing of rating committee reviews may not be dictated by an IRE or its 8

9 agents. However, analytical teams may call a rating committee to respond to a request from an IRE or its agents for a rating confirmation. 4. In the exceptional circumstance where a rating has not been reviewed within a 12 month period, a Regional Group Head needs to approve a notification which must be sent to the Exception Log, including: The analytical group or sector, The name of the IRE or transaction/security name, The date of the last credit review, The reason for the exception, An expected timeline for review of the rating. No exception may exceed 4 weeks beyond the 12 month review cycle. 5. After a Rating Watch has been in place for six months, it must be reviewed by a rating committee and a RAC must be published. In accordance with RPM Section XI, subsection A an Abbreviated Committee may be used if there have been no material changes in the IRE's performance or the circumstances which caused the Rating Watch. Thereafter, the Rating Watch must be reviewed by a rating committee every 3 months until the Rating Watch is resolved. 6. Bonds that are entirely wrapped by an entity rated by Fitch and where Fitch has only assigned a rating to the wrapped bond do not need to be reviewed by a rating committee unless the rating on the entity changes. However, in all cases where the underlying rating (i.e. the rating that would exist without the wrap) has been published or provided to a third party as well, the underlying rating should be subject to the same ongoing surveillance and regular committee reviews as all other (unwrapped) ratings. 7. Bonds that are legally defeased (i.e. where the original claim against the obligor has been discharged and an alternative source of funding has been provided) do not have to be reviewed by a rating committee, provided that the analytical team has received and reviewed appropriate defeasance documentation and a Managing Director has approved the cessation of surveillance. In all cases, a record of such approval must be retained in the analytical file. 8. In the event Fitch decides it is appropriate to conduct a portfolio review e.g. due to criteria change it may release rating changes of the portfolio at the same time. At such occurrence it must be approved by the relevant Regional Group Head and document in the minutes. Analysts should also refer to RPM Section XIX, subsection A, no The primary analyst or, in their absence, the secondary analyst must remain abreast of changes in other IRE or transaction ratings that serve as inputs to an IRE or transaction rating that he/she is responsible for monitoring. This monitoring includes Shadow ratings and internal Private ratings. The relevant analyst must explain clearly what ongoing support is required from another analytical team, and both teams are jointly responsible for ensuring that the necessary information is shared in a timely manner. 10. Rating committees are not required to publish Non-Rating Action Commentaries [NRACs] that simply comment on an IRE or transaction, and either involve no rating action or only an implicit affirmation in response to an event that has already been considered by a previous rating committee and where Fitch s position has already been outlined in previously published commentaries (i.e. a comment to the effect that there is no impact on the rating). However, such cases should be discussed and agreed in advance with the relevant manager. VIII. Committee Packages/Memos and Presentations The primary, secondary or performance analyst, as applicable, is responsible for providing the rating committee with a clear, concise and high-quality committee package/memo. 1. The committee package is the responsibility of the primary analyst or, in his/her absence, the secondary analyst unless the rating under consideration is an existing rating for which monitoring responsibility lies with a 9

10 performance analyst. In the latter case, responsibility for the committee package lies with the performance analyst. 2. Each analytical group is responsible for establishing a written best practice timeline for the circulation of committee packages for regularly scheduled reviews. Committee packages for scheduled (as opposed to event-driven) reviews should be circulated in advance of committee meeting. Best practice for this advance circulation is 48 hours. Where the period is less than 48 hours, the committee chair should exercise their discretion, based upon the length and complexity of the materials presented, and set aside reading time at the start of the committee where appropriate. 3. In the event that a credit event necessitates the circulation of a committee package with less notice than the group-determined best practice, the responsible analyst must still ensure that as much notice as possible is given. In cases of very short notice, the committee chairperson should consider whether it is necessary to allow a brief period of reading time at the start of the committee. 4. All committee packages must be complete when circulated and must be written in a way that is understandable to analysts within the same (broad) analytical group, even if they do not typically focus on the specific region, asset class or financial structure of the given IRE or transaction. 5. In all cases, other than exceptional circumstances concerning National ratings in a limited number of offices, the committee package must be written in English the working language of the company. In cases where the committee package is not in English, the recommendation and the rationale must be summarized in English. B. Committee Packages Content Details The committee package/memo must contain sufficient content, consistent with the relevant methodologies and criteria, to provide a solid basis for the recommended rating action. 1. All committee packages must contain: The purpose or reason for the committee. All existing ratings. A recommendation and a rationale for each proposed rating including, where relevant, the IRE s rating and all classes or tranches of debt to be rated. 2. Where one rating (for example, an Issuer Default Rating) serves as a benchmark for other ratings, the rating recommendations for all of the other ratings must be consistent with the rating recommendation concerning the benchmark rating. 3. If a Corporate or Public Finance debt instrument is to be rated, the intended use of the proceeds must be identified in cases where the issuer is a new or infrequent issuer and any significant financial covenants in the transaction must be highlighted. 4. Committee packages must not contain references to the rating expectations of IREs or their agents, other than in reference to an IRE s declared financial policies. 5. Committee packages must not contain references to fees, commercial relationships between Fitch and the IRE and/or its agents or any other BRM or marketing activities. 6. Each analytical group is responsible for establishing a written format for the core content that must be included within a standard committee package for that group. At a minimum, this content must be sufficient for all voting committee members to understand the rating recommendation, assess whether the available data is sufficiently robust relative to its materiality to the rating, participate in a full and constructive committee discussion and reach a fully informed rating opinion. Where the rating recommendation or rationale is based largely on the use of models and/or data spreadsheets, these results must be summarized in prose within the committee package and/or the committee presentation. The template content for scheduled (as opposed to event-driven) committees is attached as Appendix I. The content of committee packages for event-driven committees is not prescribed, but should include, as a minimum, the most recent committee s minute sheet, a list of all outstanding ratings, and a recommendation from the presenting analyst. 10

11 7. The oral presentation made to the committee by the primary or secondary analyst must be well structured and concise. In addition to a copy of the committee package, the primary and secondary analysts must bring to the committee any other documents that might reasonably be expected to be needed to answer questions raised by committee members to facilitate a thorough discussion. IX. The Committee Chair The chairperson is responsible for ensuring that the committee runs smoothly and is conducted in accordance with Fitch s policies. The Regional Group Head is responsible for approving the process of committee chair selection. Further instruction is provided in the Bulletin #34 Rotation Policy. 1. The committee chair: Must be preselected before the respective committee. Must be a member of the analytical staff titled Senior Director or higher. Must have sufficient analytical experience and authority. Must not be selected by the primary, secondary or performance analyst. 2. In no circumstances may the chairperson be the primary, secondary or performance analyst for the rating(s) under discussion or, in the case of an internal appeal committee, the person who requested the appeal. However, the chairperson may also serve as the independent committee member in certain circumstances in order to facilitate timely committees. 3. The chairperson is responsible for: Double checking the committee package to determine if it is of a sufficient quality to serve its purpose and that the committee members have had adequate time to review it either before the committee or at the start of the committee (reading time). Identifying voting members either in advance of, or at the start of, the committee and ensuring that these members meet the quorum, committee composition and maximum participation requirements of RPM Section X, subsection A. Ensuring that the committee is conducted in a professional and appropriate manner and that the discussion remains relevant and concise. Ensuring that all committee members have the opportunity to participate. Ensuring that the committee reviews the data used in the development of the rating to confirm that it is sufficiently robust relative to its materiality to the rating. Ensuring that all material questions have been resolved before a final vote is taken. Taking the committee vote and identifying if there will be an internal appeal. Ensuring that an accurate minute sheet is prepared (the task of actually completing and filing the minute sheet may be delegated). Ensuring that any follow-up issues that arise during the committee are included in the minute sheet and addressed in a timely manner. In situations where the committee is suspended, ensuring that the committee is reconvened and all outstanding matters are resolved or a rating withdrawal considered within a reasonable time frame. 4. The chairperson is subject to rotation requirements as described in the Bulletin #34 Rotation Policy. 11

12 X. Committee Membership and Voting Rating decisions must be consistent with Fitch s established criteria and methodologies and committee members must give consideration to all relevant factors, including both qualitative and quantitative factors, as applicable. All voting committee members must have sufficient relevant analytical experience to consider and, where necessary, challenge the rating recommendation. Rating decisions are made by consensus (general agreement) and can only be made by committees that meet Fitch s quorum, committee composition and maximum participation requirements. 1. The minimum number of voting members required for any committee decision to be valid (the quorum) is four, including at least one Senior Director. In addition, a majority of voting members must be titled Director or above. 2 These requirements apply to all committees, including those convened to consider Rating Outlook and Rating Watch changes. 2. The maximum number of voting members at any committee is nine. Additional analysts may attend the committees as observers, subject to time and resource considerations. 3. Each voting member, including the chairperson, has one vote. 4. Voting members must be present for the entire committee to vote. 5. The primary analyst always has the right to vote, subject to no. 6 below. Other voting members must be titled Associate Director or above. Exceptions to this policy, which authorize voting rights to staff titled Analyst on a committee or group basis, must be approved by the relevant Managing Director and must be notified to the Exceptions Log in accordance with RPM Section I, subsection B. 6. New hires within the analytical group below the level of Senior Director are not eligible to vote on any rating committee during the longer of any probation period documented within the terms of their employment and 90 days from their employment start date. Exceptions to this policy, which authorize voting rights within such probation period, must be approved by the relevant Managing Director and must be notified to the Exception Log in accordance with RPM Section I, subsection B. 7. All committees must include at least one independent voting member. An independent member is defined as any analyst, titled Director or above, who is from outside the immediate analytical team presenting at the committee 3, for example: An analyst who covers a different sector or geographic region within the same broad analytical group. An analyst from a different analytical group. Any Managing Director within the broad analytical group, other than a Managing Director who also serves as the immediate team head, for the analytical team presenting to the committee. A Group Managing Director. A Group, Regional, or the Chief Credit Officer. Best practice for international-scale ratings in corporate finance is to have two independent members attend and vote at each committee. The chair of the committee may, at their discretion, opt to permit the committee to operate with the standard quorum where they deem it appropriate. 8. In all cases, relevant analytical expertise, rather than location, must be the primary factor used to determine voting members. As an example, committees concerned with National Ratings must contain at least some analysts who are familiar with other ratings on the National scale in question to ensure consistent relativities. 2 For committees concerned with solely National ratings, the majority of voting members must be titled Associate Director or above rather than Director or above. 3 For committees concerned with solely National Ratings, the independent member must be titled Associate Director or above rather than Director or above 12

13 9. Wherever possible, the International and National ratings for an issuer with both International and National ratings should be determined by a single committee, and rating actions on both scales should be taken simultaneously. 10. Where an IRE or transaction rating is dependent on the rating of another IRE other than referenced in RPM Section VI. subsection C, no. 4, the relevant analyst(s) must be invited to the committee. In addition, where a significant portion of the business of the IRE under consideration resides outside the analytical group assessing the IRE, the participation of analysts from the relevant group(s), including cross-region participation if appropriate, must be sought. In cases where the analyst(s) are unable to attend the committee, they must be given the opportunity to provide feedback in advance. Any feedback provided that is relevant to the rating discussions must be shared with the committee members. In cases where the analyst(s) attend the committee, there is no requirement that they be given a vote; this issue should be decided on a case-by-case basis by the committee chair. 11. Where relevant, members of the Legal Group may also be invited to attend rating committees. However, they are not eligible to vote and are not part of the quorum. 12. Analysts responsible for monitoring ratings that may, in turn, be affected by the rating of the IRE or transaction under consideration at a particular rating committee must take steps to ensure that they are notified of that committee s outcome in a timely manner. This is to ensure that any rating actions that may be triggered with respect to other IREs or transactions are taken promptly. 13. Rating decisions are made by consensus. A committee vote need not be unanimous, but all voting committee members must be able to accept the decision of the majority. If any committee member is unable to accept that the rating determined by the majority represents a valid interpretation of the information presented and the relevant criteria, he or she must initiate an internal appeal. 14. Where a committee determines a rating, but notes that its decision is subject to the primary or secondary analyst obtaining additional data or an additional piece of information, the responsible analyst should provide the relevant data or information to all voting committee members before the rating decision, that was made subject to this data or information being obtained, is announced. When providing this information, the analyst should provide a deadline for any additional feedback. Such feedback must be raised orally with the committee chairperson. The chairperson is responsible for reconvening the committee to resolve any material points raised. In all cases where no material points are raised following the circulation of the additional information, the committee shall be deemed as being concluded at the time when the deadline for any additional feedback is reached. The conclusion of this process must be documented in the final minute sheet. 15. In the event that the chairperson determines that further substantive analysis or information is required before the committee can move to a vote, the committee must be adjourned to allow this material to be gathered. In such cases, the chairperson must set a clear time frame for the committee to be reconvened. If the original committee is not available to reconvene, the chairperson must ensure that an even balance of views from the initial committee is present at the reconvened committee. In cases where the specified information does not prove to be available within a reasonable time frame, the committee must consider whether there is sufficient information available to assign or maintain the rating or, in the case of an existing rating, whether it must be withdrawn in accordance with RPM Section XII. 16. In all cases where the rating committee does not believe that the available information is sufficiently robust relative to its materiality to the rating, no rating shall be assigned or maintained. XI. Abbreviated Committees Abbreviated ( ) committees may be held where a rating committee is required but where no material credit events have occurred. The voting members of the abbreviated committee review the committee package without gathering for a formal committee presentation and discussion. Abbreviated committees must still meet the quorum requirements specified in RPM Section X. If any material issues are raised, a full committee must be held. 1. Abbreviated committees are permitted: 13

14 To review an existing rating, including expected ratings, with no material changes to the IRE, instrument or transaction. To assign a full rating in place of a Credit Assessment within a short time frame in which there have been no material credit developments. Ahead of the publication of a previously private rating at an unchanged rating level/rating Outlook. Where publication of a new IRE rating has been delayed beyond four weeks and there have been no material credit events in accordance with RPM Section XIX, subsection A, no. 1. To assign ratings to a new debt class of an IRE (where non-contentious/non-complex). To withdraw a rating at an unchanged rating level/rating Outlook. To conduct additional quarterly or semi-annual reviews of National ratings where required by local regulation, in cases where there have been no material credit developments. All other abbreviated committees must be approved by the relevant Managing Director within the analytical group. Such permission may be granted on either a case-by-case basis by rating or a broad basis covering all ratings with certain characteristics as identified by the relevant Managing Director. Such concurrence must be documented in the minute sheet. 2. A chairperson and a rating committee that meets the quorum, committee composition and maximum participation requirements must be determined in accordance with the guidance of Sections IX and X, subsection A, of the RPM, and the committee package, as defined in Section VIII of the RPM, must be circulated to all committee members. 3. All committee members must inform the chairperson of their votes orally. 4. The chairperson must ensure that an accurate minute sheet is prepared in accordance with RPM Section XIII. 5. If any committee member votes against the recommendation or otherwise raises a substantive point that brings into question the appropriateness of the rating recommendation, the chairperson must convene a full rating committee so that the matter can be discussed fully. XII. Rating Withdrawals Fitch s ratings remain its property at all times, and Fitch has full discretion to withdraw a rating at any time and for any reason. 1. Rating withdrawals must be determined by a rating committee unless: An entity no longer exists or a forthcoming debt issue carrying an expected rating is no longer expected to proceed as previously envisaged, in which case the withdrawal must be approved by the analyst s manager. A transaction is bought back by the issuer (i.e. taken private) or fully cash collateralized ( escrowed or prerefunded ) to maturity, in which case the withdrawal must be approved by the analyst s manager. When only a de minimis amount of an issue or tranche remains outstanding.4 When an issue or tranche has defaulted and there is no associated Recovery Rating. The rating on the entity that fully wraps the debt issue is withdrawn and the underlying issue does not have a rating. 2. Wherever a rating committee is called to consider withdrawing a rating, the relevant Managing Director must be notified ahead of the committee. In high profile or controversial cases, the relevant Regional Group Head must also be notified. 4 Situations where an issue has been redeemed, matured or paid in full are not considered rating withdrawals. 14

15 3. Fitch does not withdraw ratings simply in response to a request from an IRE or its agents. However, it may be appropriate for a committee to conclude that a rating should be withdrawn following such a request if there are other reasons for withdrawal, such as a lack of information, a lack of market interest or regulatory constraints. 4. In all cases where the primary, secondary or performance analyst, as applicable, and/or his/her manager believes that the information currently available from all sources is below the necessary threshold to maintain a rating, a rating committee must be called to consider withdrawing the rating. A rating must be withdrawn if a rating committee concurs that the information available is insufficient to maintain the rating. 5. Ratings may be withdrawn after 30 days have elapsed following a default. A default rating may be maintained beyond the 30 days wherever it is deemed appropriate to do so and sufficient information is available for the relevant analytical team to monitor the situation adequately and, where relevant, maintain appropriate Recovery Ratings. 6. At the time of withdrawal, the outstanding rating must be the rating that a rating committee determines most appropriately reflects the existing credit profile of the IRE or transaction. Thus, a rating withdrawal cannot be used to prevent a change in the rating level, and if necessary, a rating must be upgraded or downgraded prior to or concurrent with the withdrawal. 7. Where an upgrade or downgrade is not considered necessary by the rating committee, the rating must be affirmed prior to or concurrent with its withdrawal unless the rating is being withdrawn due to a lack of information or the rating is on Rating Watch. 8. If a rating is on Rating Watch, every effort must be made to resolve the Watch prior to withdrawal. Where the timing of the event driving the Rating Watch does not support an immediate resolution and withdrawal is deemed to be necessary or a rating is being withdrawn due to a lack of information, the committee may approve a withdrawal without resolution of the Rating Watch. In such circumstances, as far as possible, the committee must seek to identify the likely direction and scale of any rating movement had rating coverage been maintained (e.g. if the Rating Watch related to a merger that was still pending at the time of withdrawal, the committee must consider the likely rating implications if the merger were either to be completed or abandoned). 9. There is no option to suspend a rating. However, ratings coverage on an IRE or transaction where ratings were previously withdrawn may be initiated again and a new rating assigned, provided that sufficient information is available to assign and monitor a new rating. All cases of re-initiation within 90 days must be approved by the relevant Regional Group Head. 10. Analysts should additionally refer to RPM Section XIX, subsection A, no. 10 and any written communication and disclosure procedures established by the Corporate Communications Group. XIII. Minute Sheets Minute sheets recording the committee process and decisions must be prepared for all rating committees (including abbreviated committees), appeal review panels and appeal committees. 1. Each analytical group is responsible for establishing the most appropriate committee minute format for use within the group. All rating committee and appeal committee minute sheets must include the following minimum content: Analytical group or sector. IRE or transaction/security name. Date of committee. Name and title of chairperson. Name and title of the primary, secondary or performance analyst, as applicable. Location of the lead analyst. Name and title of all other voting members (identifying independent member). Name of any observers. 15

16 The rating recommendation for each rating under consideration, including Rating Outlook and Watch recommendations where applicable. The committee decision for each rating under consideration, including Rating Outlook and Watch decisions where applicable. Whether there are any internal or external appeals, and if so, the scope of the appeal. Material issues raised and resolved during the committee, other than those already addressed in the committee package. Confirmation that the data used in the development of the rating was reviewed by the committee and a statement as to whether it was considered sufficient and robust relative to its materiality to the rating for a rating to be assigned/maintained. Conclusion of follow-up investigations, along with the date on which the results were communicated to the committee members. In the event that a rating produced by another Credit Rating Agency with respect to underlying assets or structured finance instruments is used as an input into Fitch s analysis, instances where the analysis departs from (i.e. notches ) existing ratings from the other Credit Rating Agency including the analytical rationale for the approach taken. 2. Where a committee is suspended to allow the presenting analyst time to gather additional information, the fact that the committee was suspended, as well as the time frame agreed for the information to be provided, must be noted in the minutes. 3. The voting decisions and any opinions expressed by individual participants must not be recorded in the committee minutes. Similarly, the final vote tally must not be recorded. 4. The chairperson is responsible for ensuring that a minute sheet is prepared, although the actual job of preparing the minutes may be delegated. 5. Each analytical group is responsible for establishing controls to ensure that committee minutes are recorded accurately. Whatever systems are adopted must be applied consistently. Until the appropriate front-end applications are enhanced to automate the rating service and minute sheets, each analytical group will have a Senior Director or higher approve the minutes either by signing the minute sheet or giving approval via that the minutes have been recorded accurately. The final minute sheet including the approval must be filed in accordance with the Bulletin # 11 File Maintenance and Recordkeeping Policy. 6. All minute sheets for International Ratings must be written in English. Where National Rating minute sheets are written in a language other than English, an English summary must be prepared that provides, at a minimum: (i) the names and titles of the voting members, the chairperson, the primary, secondary, or performance analysts and the independent member; (ii) the rating proposal(s); and (iii) the rating decision(s). 7. Minutes must be prepared for all appeal review panels. Each analytical group is responsible for establishing the most appropriate appeal review panel minute format. However, all appeal review panel minute sheets must include the following minimum content: Analytical group or sector. IRE or transaction/security name. Date of appeal review panel. Name and title of chairperson. Name of the primary analyst. Name and title of the independent members. Name of any observers. Nature of the information provided by the IRE or its agents. The appeal review panel decision. 16

17 XIV. Appealing a Rating Committee Decision Initial Steps A. Internal Appeals Any rating decision may be appealed internally including an affirmation or a Rating Outlook or Watch status. However, the right to appeal is limited to: (i) analytical staff who are present at the rating committee, as either a voting or non-voting member, and who generally have the right to vote at Fitch rating committees in accordance with RPM Section X; (ii) Group Managing Directors with analytical responsibilities and Regional Group Heads, whether present at the rating committee or not; and (iii) the relevant Group Credit Officer, whether present at the rating committee or not. An internal appeal is automatically triggered where a consensus cannot be reached. 1. Appeals must be made to the committee chairperson in a timely fashion, normally immediately after the committee decision is taken. 2. Analysts appealing a rating decision must provide a coherent analytical case, consistent with the applicable methodologies and criteria, for an alternative rating action. 3. In all cases of internal appeals, there must be no communication of the rating(s) to the IRE or its agents until the appeal has been resolved. The fact that an internal appeal is under way or has taken place must not be disclosed. B. External Appeals Appeal Review Panels IREs and/or their agents may request that any rating decision, including affirmations or a Rating Outlook or Watch status, be reviewed. However, IREs and their agents have no specific right to an appeal, and such requests will only be granted when an IRE or its agents provide to Fitch in a timely manner new or additional information that Fitch believes is relevant to the rating. Following an external appeal any rating decision may be internally appealed. However, the right to appeal is limited to: (i) analytical staff who are present at the rating committee, as either a voting or non-voting member, and who generally have the right to vote at Fitch rating committees in accordance with RPM Section X; (ii) Group Managing Directors with analytical responsibilities and Regional Group Heads, whether present at the rating committee or not; and (iii) the relevant Group Credit Officer, whether present at the rating committee or not. An appeal is automatically triggered where a consensus cannot be reached. 1. Whenever an IRE or its agent requests an appeal, the chairperson of the original committee, together with the primary, secondary or performance analyst and two senior analysts (Senior Director or higher) who were not involved in the appealed rating decision and are chosen by the chairperson or the Managing Director of the relevant analytical group, must form an appeal review panel. 5 The purpose of this panel is purely to determine whether the appeal is warranted (i.e. whether the IRE and/or its agent has provided new or additional information that is relevant to the rating). The primary, secondary or performance analyst, as applicable, will present an outline of the material received from the IRE and/or its agents to the appeal review panel. In all cases where it is agreed that new or additional information that is material and relevant has been provided, an appeal committee must be convened. 2. Minutes must be prepared for all appeal review panels (whether the conclusion is that the appeal is warranted or not) in accordance with RPM Section XIII, subsection A, no In cases where an IRE or its agents provide the new or additional information to Fitch via a formal presentation, attendance at the presentation shall be determined by the committee chairperson in conjunction with the Managing Director for the relevant analytical team. The primary, secondary or performance analyst(s) may attend, or alternatively, participation may be expanded to include additional analysts. However, the presentation shall not be attended by the full membership of either the original rating committee or the appeal committee. 4. In accordance with RPM Section XIX, subsection A, no. 9, analysts must ensure that where an external appeal committee decision results in a rating outcome that is different from committee decision that was appealed, this 5 Appeal review panels concerned with solely National Ratings shall consist of the chairperson, the primary, secondary or performance analyst and one other analyst who need not be titled Senior Director or above. The analyst must be approved by the chairperson or the Managing Director responsible for the analytical team. 17

18 is disclosed in the RAC. If an appeal review panel has concluded under RPM Section XIV, subsection B, no. 1 that no appeal committee is required, no additional disclosure is required. In no instance shall the committee decision that was appealed be disclosed or discussed externally. XV. Timing of Appeal Committees Both internal and external appeals must be resolved in a timely manner and must not be used to unduly delay a rating action. 1. For existing ratings, both internal and external appeals must be resolved within two business days wherever possible. 2. In the event that it is not possible to resolve an appeal within two business days, the relevant Managing Director must decide whether it is appropriate to call a rating committee to consider placing the ratings on Rating Watch until the appeal is concluded. 3. For new ratings, resolution of the appeal may extend beyond two business days as circumstances permit. However, they must still be resolved as expeditiously as possible. XVI. Appeal Committee Membership, Voting and Packages Both internal and external appeals must be resolved by convening a new rating committee. Voting appeal committee members must have sufficient relevant analytical experience to evaluate the appeal, and a final decision shall be made by a committee that meets Fitch s quorum, committee composition and maximum participation requirements. 1. Appeal committees must be chaired by the chairperson of the original committee except in cases where: i) this requirement would unduly delay resolving the appeal, ii) the chair is the analyst who has requested the appeal, or iii) the appeal is called by a Regional Group Head or a Group Managing Director. In the first two cases, a new chairperson must be found in accordance with RPM Section IX. In the latter case, the appeal committee must be chaired by an alternative Regional Group Head or Group Managing Director, the relevant Group Credit Officer or a Regional Credit Officer. 2. The chairperson is responsible for ensuring that all appeal committees include a fair representation of members (i.e. an even balance of views) of the previous committee, including the primary or performance analyst, the analyst who requested the appeal (in the case of an internal appeal), and at least two additional senior analysts (Senior Director or higher) who did not participate in the previous rating committee. These analysts may, however, have participated in the appeal review panel. 6 In the rare case that the inclusion of the primary analyst would unduly delay the conclusion of the appeal, the chairperson may allow the committee to proceed without the primary analyst, provided that the secondary analyst is present and this situation is approved by the relevant Managing Director for the analytical team. 3. Appeal committees must additionally meet the quorum, voting entitlement and maximum participant requirements specified in RPM Section X, subsection A. 4. All appeal committee members must be provided with a copy of the original committee package, a copy of the original committee minutes and a written summary of the case put forward for the appeal, including an alternative rating recommendation where applicable. 5. All appeal committee decisions must be determined by majority vote. 6 The two additional analysts joining appeal committees concerned with National Ratings need not be titled Senior Director or above. These analysts must be agreed by the committee chairperson and the Managing Director of the analytical team. 18

19 6. Second appeals are permitted for internal appeals, but the right to call a second appeal is limited to the members of the appeal committee who did not participate in the original rating committee. A second appeal will also be triggered where there is no majority vote at the first internal appeal committee. All such cases must be referred to the relevant Group Managing Director and the relevant Regional Credit Officer. The Regional Credit Officer is responsible for notifying the Chief Credit Officer as appropriate All second appeal committee members must be provided with a complete copy of the first appeal committee package, as detailed in no. 4 above, a copy of the first appeal committee minutes and a written summary of the case put forward for the second appeal, including an alternative rating recommendation where applicable. 8. In the event that there is no majority in an external appeal committee, the original committee vote will stand. Analysts should refer to the flow diagrams on pages 18 and 19 for further clarification. 9. Second external appeals (i.e. by the IRE or its agents) are not permitted. 10. Since all external appeals are triggered by the provision of new or additional information that Fitch believes is relevant to the rating by the IRE and/or its agents, an internal appeal may follow an external appeal. Any member of the external appeal committee may appeal the rating decision subject to the provisions of RPM Section XIV, subsection A, no. 2. However, all such cases must be referred to the relevant Group Managing Director and the relevant Regional Credit Officer. The Regional Credit Officer is responsible for notifying the Chief Credit Officer as appropriate Where appeal committees are referred to the relevant Regional Credit Officer and the relevant Group Managing Director, they are jointly responsible for appointing a further appeal committee to reconsider the ratings assigned. 9 This committee will comprise an odd number of appropriate senior analytical staff. A decision will be made by majority vote and will be final. In the unlikely event that a majority vote is not achieved at the second appeal, the original committee decision will stand. Analysts should refer to the flow diagrams below for further clarification. 7 Second appeals that concern solely National Ratings must be referred instead to the relevant Regional Credit Officer and the relevant Managing Director. 8 Internal appeals that follow an external appeal concerning solely National Ratings must be referred instead to the relevant Regional Credit Officer and the relevant Managing Director and/or the Regional Group Manager. 9 For National Ratings, the Regional Credit Officer and the relevant Managing Director and/or the Regional Group Manager as appropriate are jointly responsible for appointing a second internal appeal committee to reconsider the ratings assigned. 19

20 Internal and External Appeal Process Flow Diagrams Internal Appeals 20