scholarly journals Assessment of the Macroeconomic Risk Analysis of International Credit Rating Agencies against the Principles of Soundness and Credibility

2019 ◽  
Vol 64 (3) ◽  
pp. 337-349
Author(s):  
József Simon ◽  
Henrietta Simon-András
Keyword(s):  
Risk Analysis ◽  
Credit Rating ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Macroeconomic Risk ◽  
International Credit

Are Transfer-Dependent Governments More Creditworthy? Reassessing the Fiscal Federal Foundations of Subnational Default Risk

2018 ◽  
Vol 50 (4) ◽  
pp. 1381-1403 ◽  
Author(s):  
Kyle Hanniman
Keyword(s):  
Default Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Statistical Analyses ◽  
Credit Rating Agencies ◽  
Fiscal Discipline ◽  
Rating Agencies ◽  
International Credit ◽  
Fiscal Distress ◽  
Cross National

AbstractMany fiscal federal scholars argue, often implicitly, that transfer dependence generally bolsters subnational creditworthiness by signalling a higher likelihood of national bailouts for distressed governments. This article argues that dependence fails to bestow general benefits on local borrowers because it suggests an inability to generate additional revenues in the event of fiscal distress, and because this inability does not, contrary to the expectations of many, necessarily translate into higher bailout expectations. Ultimately it is the nature, not the level, of transfers that affects local creditworthiness, whether through bailout or non-bailout channels. Stable and predictable payments, including robust equalization systems, support local creditworthiness, while volatile and unpredictable transfers do not. The article supports these arguments with a review of documents issued by the major international credit rating agencies and cross-national statistical analyses of bailout probabilities and standalone credit ratings issued by Moody’s Investors Service. It also discusses the implications of the findings for work on the fiscal discipline of subnational governments.

scholarly journals A motivation for banks in emerging economies to adapt agency ratings when assessing corporate credit

2019 ◽  
Vol 22 (1) ◽  
Author(s):  
Tanja Verster ◽  
Riaan De Jongh ◽  
Simon Greenberg ◽  
Erika Fourie ◽  
Dries De Wet
Keyword(s):  
South African ◽  
Credit Rating ◽  
Credit Ratings ◽  
Relevant Literature ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Corporate Credit ◽  
Standard And Poor's ◽  
International Credit ◽  
High Level

Background: This article considers whether South African banks should utilise the credit ratings provided by US-based credit rating agencies when assessing the creditworthiness of corporate borrowers.Aim: A review is conducted of the relevant literature and specifically the methodologies used by the credit rating agencies for ranking corporates in emerging markets.Setting: The three largest international credit rating agencies are Fitch Ratings, Moody’s Investor Services, and Standard and Poor’s. These agencies’ credit ratings cover the global spectrum of corporate, sovereign, financial and other public entities and the securities and obligations they issue. The analytical frameworks used to produce these ratings are referred to as credit rating methodologies.Method: A review of Moody’s ratings for South African corporate entities was undertaken to examine claims of a sovereign ceiling influencing the external ratings obtained by these institutions in emerging markets.Results: Only 14 of the 200 global South African ratings pierced the sovereign ceiling.Conclusion: The study concludes that the use of unmodified external ratings by banks to assess a corporate borrower should be discouraged. High-level suggestions are provided on how the methodologies and data used by the external agencies may rather be used to arrive at more suitable internal ratings.

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