1 hr ago

SEBI Requires Colour-Coded Credit Risk Meters for Debt Securities

SEBI has introduced a colour-coded tool to help people understand the credit risk of bonds and other debt investments.

The tool is called the Credit Risk-o-Meter.

It will show risk categories based on credit ratings.

The rules cover several kinds of debt securities, whether they are sold publicly or privately.

Investors should be able to see the meter in documents and on online bond platforms.

If a security has more than one rating, the meter will use the lowest one.

Unsecured debt must be clearly marked in bold red text.

The meter only shows credit risk, not whether someone should buy or sell an investment.

Investors will also be warned about other risks, including market and liquidity risks.

Key facts

Risk categories: Six categories, from lowest credit risk for AAA-rated instruments to high to very high risk of default for B-rated and lower securities.
Short-term instruments: A separate meter will use ratings from A1+ to A4/D.
Multiple ratings: The meter will reflect the lowest available rating when a security has ratings from multiple agencies.
Required disclosures: Issuers must show the rating and the rating agency's name alongside the meter.
Unsecured instruments: They must be identified in bold red text.
Issuer Not Cooperating: A separate grey “INC” category will signal when a rating agency classifies an issuer as Issuer Not Cooperating.
Disclaimers: The meter reflects only credit risk and is not investment advice or a recommendation to buy or sell.
Additional risks: Disclosures must address market and liquidity risks; for unsecured perpetual AT1 bonds, they must also highlight structural risks and possible complete loss of invested capital.

freepressjournal.in · 1 hr ago