CDS Clearing and Depository Services Inc. reports that its risk rating has been affirmed by Thomas Murray, a specialist custody rating, risk management and research firm.
CDS says Wednesday that its ‘AA’ rating represents very low risk overall, and recognizes the firm’s ongoing commitment to minimize risk for market participants. In particular, CDS says it undertakes regular stress testing of its credit risk model, in order to protect participants against the risk of default of their counterparties.
The rating assesses the risk exposures for investors associated with the processes the depository has in place to facilitate the safekeeping and the clearing and settlement of securities. It assesses six key risks. The methodology considers the capabilities of the depository and the quality and effectiveness of its operational infrastructure. It also assesses the depository’s willingness and ability to protect its participants or clients from losses. As part of the rating, the scope and quality of the depository’s services is assessed, too.
The rating outlook has also been assigned as ‘stable’, which CDS reports suggests that there are no imminent developments that may change the rating at this stage.
“CDS adopts an approach of continual review and improvement in all aspects of its operations which is transparent to its participants and the regulators. I am delighted to see that CDS undertakes regular stress testing to confirm the robustness of their model and additionally CDS has completed a comprehensive review of their risks, processes and procedures which is periodically necessary to ensure the resilience of controls and reduce operational risk,” said Simon Thomas, CEO and chief ratings officer of Thomas Murray. “The strength of CDS confirms the excellence of Canada’s capital market infrastructure and the ‘AA’ rating of CDS, one of the top ratings assigned by Thomas Murray, reflects the ongoing confidence the Canadian market has in CDS.”
Ian Gilhooley, president and CEO of the Canadian Depository for Securities Ltd. said, “CDS has been working with Thomas Murray for a number of years and is pleased to place our sophisticated risk management model under independent scrutiny. The rating at AA, the highest given to any depository, is a reflection of our commitment to minimize risks in the Canadian capital markets and demonstrates the enormous effort that we have put in our developments and risk reduction initiatives over the past years.”