A credit rating is an assessment of a bank's creditworthiness provided by independent rating agencies like Fitch, Moody's, and S&P. It indicates the likelihood that a financial institution will meet its financial obligations. Higher ratings indicate lower credit risk, while lower ratings suggest higher risk of default.

Investment grade refers to banks with credit ratings of BBB- (S&P/Fitch) or Baa3 (Moody's) or higher. These banks are considered to have relatively low risk of default and are typically eligible for institutional investment. Banks rated below investment grade are considered 'speculative' or 'high yield' and carry higher credit risk.

While all three agencies assess credit risk similarly, they use slightly different rating scales. S&P and Fitch use AAA, AA+, AA, AA-, A+, A, A-, BBB+, etc. Moody's uses Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, etc. Despite the different notation, the ratings are broadly comparable across agencies.

A rating outlook indicates the potential direction of a bank's credit rating over the medium term. 'Positive' outlook means the rating may be raised, 'Stable' means it's likely to remain unchanged, 'Negative' means it may be lowered, and 'Under Review' or 'Watch' means the rating is being actively evaluated for potential change.

UK bank deposits are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per person, per institution. This protection applies regardless of the bank's credit rating. However, a higher-rated bank generally indicates stronger financial health and lower risk of requiring FSCS intervention.

Credit ratings are reviewed regularly by rating agencies, typically annually, but can be changed at any time if there are significant developments affecting a bank's creditworthiness. Rating changes (upgrades or downgrades) are relatively infrequent for stable banks but can occur due to changes in financial performance, economic conditions, or regulatory environment.

The highest credit rating is AAA (S&P/Fitch) or Aaa (Moody's), indicating the highest quality with minimal credit risk. Very few banks globally hold this top rating. Most major UK banks hold ratings in the A or AA range, which still represent strong financial health and low credit risk.

Rating agencies may differ in their assessments due to different methodologies, weightings of various factors, and timing of reviews. Each agency has its own proprietary approach to evaluating credit risk. A bank might receive an A+ from S&P but an A1 from Moody's (equivalent ratings) or occasionally ratings that differ by a notch or two.