Fitch Ratings Updates International Local and Regional Governments Ratings Criteria

(The following statement was released by the rating agency) Related Fitch Ratings Content: International Local and Regional Governments Rating Criteria (https://www.fitchratings.com/site/re/10134403) Fitch Ratings-London/Paris-11 September 2020: Fitch Ratings has updated its "International Local and Regional Governments (LRGs) Rating Criteria" as part of the routine criteria review process. Revisions to the criteria are mostly editorial in nature and there is no impact on existing ratings. The main criteria revisions are: Firstly, language has been added clarifying the risk profile concept, defining it as the risk associated with the unexpected weakening of LRGs' ability to cover their debt service needs over the scenario horizon. This factors in unexpected cash flow declines due to revenue drops, expenditure hikes and debt service increases in the context of the macroeconomic environment. Secondly, we have added guidance for Standalone Credit Profile (SCP) assessments in the low-speculative-grade of 'ccc' and below to better assess the credit strength of LRGs in countries with distressed economies and financial markets, particularly LRGs' exposure to significant refinancing needs and high liquidity risk accompanied by weak debt coverage metrics. If necessary, SCPs may be further differentiated in the 'ccc' category by comparing qualitative factors and quantitative metrics against similar peers. In addition, the revised criteria introduce general approach to reflect relevant environmental, social and governance (ESG) factors into its LRG ratings, as it does for all factors that it believes are relevant and material for creditworthiness. This is an integrated scoring system to provide transparency on the relevance and materiality of ESG factors to each rating as well as an overall ESG Relevance Score. Scores range from '5' for factors that individually are key rating drivers with a high weight to '1' for those that are irrelevant to all LRGs from a credit perspective. The LRG Rating Criteria describes the analytical framework used by Fitch when analysing LRGs outside the US or debt issued by them. Ratings of LRGs are determined by an assessment of the SCP of the LRG, reflecting the combination of the issuer's risk profile and financial strength, and further application of potential rating factors affecting the Issuer Default Rating but not captured in the SCP. These factors include extraordinary support for the entity from the upper-tier government or sovereign cap, as well as additional asymmetric risk consideration. The report replaces the criteria report titled "Rating Criteria for International Local and Regional Governments", dated 13 September 2019. Contact: Nicolas Painvin Managing Director +33 1 44 29 91 28 Fitch France SAS 60 rue de Monceau, 75008 Paris Vladimir Redkin Senior Director +7 495 956 2405 Media Relations: Athos Larkou, London, Tel: +44 20 3530 1549, Email: athos.larkou@thefitchgroup.com Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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