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Role of Credit Rating Agencies. How do they rate countries?

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Role of Credit Rating Agencies
What is Credit Rating?

A credit rating is an opinion on the creditworthiness of individuals, corporations or governments. It is based upon the history of borrowing and repayment, as well as availability of assets and extent of liabilities. It is an evaluation made by credit rating agency of the debt issuers likelihood of default.

 

The rating does not provide guidance on other aspects essential for investment decisions, such as market liquidity or price volatility.

According to rating agencies, ratings are opinions and not recommendations to purchase, sell, or hold any security.

Countries are issued sovereign credit ratings. This rating analyzes the general creditworthiness of a country or foreign government. Sovereign credit ratings take into account the overall economic conditions of a country including the volume of foreign, public and private investment, capital market transparency and foreign currency reserves.

Read more about: economy recession standard poor
Story first published: Tuesday, August 9, 2011, 13:25 [IST]
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