Countries by credit rating

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This is a list of countries by credit rating, showing long-term sovereign credit ratings as reported by the three major credit rating agencies: Standard & Poor’s, Fitch and Moody’s.

Standard & Poor’s

For S&P, a bond is considered investment grade if its credit rating is BBB- or higher. Bonds rated BB+ and below are considered to be speculative grade, sometimes also referred to as "junk" bonds.

Country	Rating	Outlook	Date
Abu Dhabi	20AA	Stable	Jul 2011
Albania	09B+	Stable	Jul 2011
Andorra	17A	Negative	Jul 2011
Angola	10BB-	Stable	Jul 2011
Argentina	08B	Stable	Jul 2011
Aruba	16A-	Negative	Jul 2011
Australia	22AAA	Stable	Jul 2011
Austria	22AAA	Stable	Jul 2011
Azerbaijan	12BB+	Positive	Jul 2011
Bahamas	15BBB+	Stable	Jul 2011
Bahrain	14BBB	Watch Negative	Jul 2011
Bahrain	10BB-	Stable	Jul 2011
Barbados	13BBB-	Stable	Jul 2011
Belarus	08B	Watch Negative	Jul 2011
Belgium	21AA+	Negative	Jul 2011
Belize	08B	Watch Negative	Jul 2011
Benin	08B	Stable	Jul 2011
Bermuda	20AA	Stable	Jul 2011
Bolivia	09B+	Stable	Jul 2011
Bosnia and Herzegovina	09B+	Stable	Jul 2011
Botswana	16A-	Stable	Jul 2011
Brazil	13BBB-	Stable	Jul 2011
Bulgaria	14BBB	Stable	Jul 2011
Burkina Faso	08B	Stable	Jul 2011
Cambodia	09B+	Stable	Jul 2011
Cameroon	08B	Stable	Jul 2011
Canada	22AAA	Stable	Jul 2011
Cape Verde	09B+	Stable	Jul 2011
Chile	18A+	Positive	Jul 2011
China	19AA-	Stable	Jul 2011
Colombia	13BBB-	Stable	Jul 2011
Cook Islands	10BB-	Negative	Jul 2011
Costa Rica	11BB	Stable	Jul 2011
Croatia	13BBB-	Negative	Jul 2011
Cyprus	15BBB+	Negative	Jul 2011
Czech Republic	17A	Stable	Jul 2011
Denmark	22AAA	Stable	Jul 2011
Dominican Republic	09B+	Stable	Jul 2011
Ecuador	07B-	Stable	Jul 2011
Egypt	11BB	Negative	Jul 2011
El Salvador	10BB-	Stable	Jul 2011
Ras Al Khaimah	17A	Stable	Jul 2011
Estonia	17A	Positive	Jul 2011
Fiji	07B-	Stable	Jul 2011
Finland	22AAA	Stable	Jul 2011
France	22AAA	Stable	Jul 2011
Gabon	10BB-	Stable	Jul 2011
Georgia	09B+	Stable	Jul 2011
Germany	22AAA	Stable	Jul 2011
Ghana	08B	Stable	Jul 2011
Greece	03CC	Negative	Jul 2011
Grenada	07B-	Stable	Jul 2011
Guatemala	11BB	Stable	Jul 2011
Guernsey	22AAA	Stable	Jul 2011
Honduras	08B	Positive	Jul 2011
Hong Kong	22AAA	Stable	Jul 2011
Hungary	13BBB-	Negative	Jul 2011
Iceland	13BBB-	Negative	Jul 2011
India	13BBB-	Stable	Jul 2011
Indonesia	12BB+	Positive	Jul 2011
Ireland	15BBB+	Stable	Jul 2011
Isle of Man	22AAA	Stable	Jul 2011
Israel	17A	Stable	Jul 2011
Italy	18A+	Negative	Jul 2011
Jamaica	07B-	Stable	Jul 2011
Japan	19AA-	Negative	Jul 2011
Jordan	11BB	Negative	Jul 2011
Kazakhstan	14BBB	Stable	Jul 2011
Kenya	09B+	Stable	Jul 2011
South Korea	17A	Stable	Jul 2011
Kuwait	20AA	Stable	Jul 2011
Latvia	12BB+	Positive	Jul 2011
Lebanon	08B	Stable	Jul 2011
Liechtenstein	22AAA	Stable	Jul 2011
Lithuania	14BBB	Stable	Jul 2011
Luxembourg	22AAA	Stable	Jul 2011
Macedonia	11BB	Stable	Jul 2011
Malaysia	16A-	Stable	Jul 2011
Malta	17A	Stable	Jul 2011
Mexico	14BBB	Stable	Jul 2011
Mongolia	10BB-	Stable	Jul 2011
Montenegro	11BB	Negative	Jul 2011
Montserrat	13BBB-	Positive	Jul 2011
Morocco	13BBB-	Stable	Jul 2011
Mozambique	09B+	Stable	Jul 2011
Netherlands	22AAA	Stable	Jul 2011
New Zealand	21AA+	Stable	Jul 2011
Nigeria	09B+	Stable	Jul 2011
Norway	22AAA	Stable	Jul 2011
Oman	17A	Watch Negative	Jul 2011
Pakistan	07B-	Stable	Jul 2011
Panama	13BBB-	Stable	Jul 2011
Papua New Guinea	09B+	Stable	Jul 2011
Paraguay	09B+	Positive	Jul 2011
Peru	13BBB-	Stable	Jul 2011
Philippines	11BB	Stable	Jul 2011
Poland	16A-	Stable	Jul 2011
Portugal	13BBB-	Negative	Jul 2011
Qatar	20AA	Stable	Jul 2011
Romania	12BB+	Stable	Jul 2011
Russian Federation	14BBB	Stable	Jul 2011
Saudi Arabia	19AA-	Stable	Jul 2011
Senegal	09B+	Negative	Jul 2011
Serbia	11BB	Stable	Jul 2011
Singapore	22AAA	Stable	Jul 2011
Slovak Republic	18A+	Stable	Jul 2011
Slovenia	20AA	Negative	Jul 2011
South Africa	15BBB+	Stable	Jul 2011
Spain	20AA	Negative	Jul 2011
Sri Lanka	09B+	Stable	Jul 2011
Suriname	09B+	Stable	Jul 2011
Sweden	22AAA	Stable	Jul 2011
Swiss Confederation	22AAA	Stable	Jul 2011
Taiwan	19AA-	Stable	Jul 2011
Thailand	15BBB+	Stable	Jul 2011
Trinidad and Tobago	17A	Stable	Jul 2011
Tunisia	13BBB-	Stable	Jul 2011
Turkey	11BB	Positive	Jul 2011
Uganda	09B+	Stable	Jul 2011
Ukraine	09B+	Stable	Jul 2011
United Kingdom	22AAA	Stable	Jul 2011
United States of America	22AAA	Negative	Jul 2011
Uruguay	12BB+	Stable	Jul 2011
Venezuela	10BB-	Stable	Jul 2011
Vietnam	10BB-	Negative	Jul 2011
Zambia	09B+	Stable	Jul 2011

Fitch

For Fitch, a bond is considered investment grade if its credit rating is BBB- or higher. Bonds rated BB+ and below are considered to be speculative grade, sometimes also referred to as "junk" bonds.

Country	Rating	Outlook	Date
Abu Dhabi	18AA	Stable	July 2007
Angola	08BB-	Stable	May 2011
Argentina	06B	Stable	July 2010
Armenia	08BB-	Stable	August 2009
Aruba	12BBB	Stable	June 2006
Australia	20AAA	Stable	February 2003
Austria	20AAA	Stable	September 2000
Azerbaijan	11BBB-	Positive	May 2011
Bahrain	13BBB+	Watch Negative	March 2011
Belgium	19AA+	Negative	May 2011
Benin	06B	Stable	September 2004
Bermuda	20AAA	Stable	August 2006
Bolivia	07B+	Stable	October 2010
Brazil	12BBB	Stable	April 2011
Bulgaria	12BBB	Positive	May 2011
Cameroon	05B-	Stable	March 2007
Canada	20AAA	Stable	August 2004
Cape Verde	08BB-	Stable	June 2009
Chile	17AA-	Stable	February 2011
China	17AA-	Negative	April 2011
Colombia	11BBB-	Positive	June 2011
Costa Rica	10BB+	Stable	March 2011
Croatia	12BBB	Negative	May 2009
Cyprus	14A-	Negative	May 2011
Czech Republic	17AA-	Positive	June 2010
Denmark	20AAA	Stable	November 2003
Dominican Republic	06B	Positive	January 2011
Ecuador	05B-	Stable	November 2010
Egypt	10BB+	Watch Negative	February 2011
El Salvador	09BB	Negative	June 2009
Estonia	15A+	Stable	July 2011
Finland	20AAA	Stable	September 2000
France	20AAA	Stable	September 2000
Gabon	08BB-	Stable	October 2007
Georgia	07B+	Positive	March 2011
Germany	20AAA	Stable	September 2000
Ghana	07B+	Stable	September 2010
Greece	04CCC	Watch Negative	July 2011
Guatemala	10BB+	Stable	February 2006
Hong Kong	19AA+	Stable	November 2010
Hungary	12BBB	Negative	December 2010
Iceland	13BBB+	Stable	May 2011
India	11BBB-	Stable	June 2010
Indonesia	10BB+	Positive	February 2011
Ireland	13BBB+	Negative	April 2011
Israel	16A+	Stable	February 2008
Italy	17AA-	Stable	October 2006
Jamaica	05B-	Stable	February 2010
Japan	17AA-	Negative	May 2011
Kazakhstan	12BBB	Positive	December 2010
Kenya	08BB-	Stable	January 2009
South Korea	18AA	Stable	September 2009
Kuwait	18AA	Stable	September 2008
Latvia	12BBB	Positive	March 2011
Lebanon	06B	Stable	March 2010
Lesotho	09BB	Negative	May 2011
Lithuania	13BBB+	Positive	May 2011
Luxembourg	20AAA	Stable	September 2000
Macedonia	10BB+	Stable	October 2010
Malaysia	15A	Stable	June 2009
Malta	16A+	Stable	July 2007
Mexico	13BBB+	Stable	November 2009
Mongolia	07B+	Stable	November 2010
Morocco	12BBB	Stable	April 2007
Mozambique	07B+	Stable	July 2003
Namibia	12BBB	Positive	December 2010
Netherlands	20AAA	Stable	July 2011
New Zealand	20AAA	Negative	July 2009
Nigeria	09BB	Negative	October 2010
Norway	20AAA	Stable	September 2000
Panama	11BBB-	Positive	March 2010
Peru	12BBB	Positive	June 2010
Philippines	10BB+	Stable	February 2006
Poland	15A	Stable	January 2007
Portugal	11BBB-	Watch Negative	April 2011
Ras al-Khaimah	15A	Stable	January 2008
Romania	11BBB-	Stable	July 2011
Russia	12BBB	Positive	September 2010
Rwanda	06B	Stable	August 2010
San Marino	15A	Negative	October 2009
Saudi Arabia	17AA-	Stable	July 2008
Serbia	08BB-	Stable	November 2010
Seychelles	07B+	Stable	February 2011
Singapore	20AAA	Stable	May 2003
Slovakia	16A+	Stable	July 2008
Slovenia	18AA	Stable	July 2006
South Africa	15A	Stable	January 2011
Spain	19AA+	Negative	March 2011
Sri Lanka	08BB-	Stable	July 2011
Suriname	07B+	Stable	October 2009
Sweden	20AAA	Stable	March 2004
Switzerland	20AAA	Stable	September 2000
Taiwan	18AA	Negative	January 2009
Thailand	14A-	Stable	May 2011
Tunisia	12BBB	Negative	March 2011
Turkey	10BB+	Positive	November 2010
Uganda	06B	Positive	August 2009
Ukraine	06B	Positive	July 2011
United Kingdom	20AAA	Stable	September 2000
United States	20AAA	Stable	September 2000
Uruguay	10BB+	Positive	July 2010
Venezuela	07B+	Stable	December 2008
Vietnam	07B+	Stable	July 2010
Zambia	07B+	Stable	March 2011

Moody’s

Country	Rating	Outlook	Date
Albania	08B1	Stable	Jul 2011
Angola	09Ba3	Stable	Jul 2011
Argentina	06B3	Stable	Jul 2011
Armenia	10Ba2	Stable	Jul 2011
Australia	21Aaa	Stable	Jul 2011
Austria	21Aaa	Stable	Jul 2011
Azerbaijan	11Ba1	Positive	Jul 2011
Bahamas	15A3	Stable	Jul 2011
Bahrain	14Baa1	Negative	Jul 2011
Bahrain	09Ba3	Stable	Jul 2011
Barbados	12Baa3	Negative	Jul 2011
Belarus	06B3	Watch Negative	Jul 2011
Belgium	20Aa1	Stable	Jul 2011
Belize	06B3	Stable	Jul 2011
Bermuda	19Aa2	Stable	Jul 2011
Bolivia	08B1	Positive	Jul 2011
Bosnia and Herzegovina	07B2	Negative	Jul 2011
Botswana	16A2	Negative	Jul 2011
Brazil	13Baa2	Positive	Jul 2011
Bulgaria	13Baa2	Stable	Jul 2011
Cambodia	07B2	Stable	Jul 2011
Canada	21Aaa	Stable	Jul 2011
Cayman Islands	18Aa3	Stable	Jul 2011
Chile	18Aa3	Stable	Jul 2011
China	18Aa3	Positive	Jul 2011
Colombia	12Baa3	Stable	Jul 2011
Costa Rica	12Baa3	Stable	Jul 2011
Croatia	12Baa3	Stable	Jul 2011
Cuba	05Caa1	Stable	Jul 2011
Cyprus	14Baa1	Negative	Jul 2011
Czech Republic	17A1	Stable	Jul 2011
Denmark	21Aaa	Stable	Jul 2011
Dominican Republic	08B1	Stable	Jul 2011
Ecuador	04Caa2	Stable	Jul 2011
Egypt	09Ba3	Negative	Jul 2011
El Salvador	10Ba2	Stable	Jul 2011
Estonia	17A1	Stable	Jul 2011
Fiji	08B1	Negative	Jul 2011
Finland	21Aaa	Stable	Jul 2011
France	21Aaa	Stable	Jul 2011
Georgia	09Ba3	Stable	Jul 2011
Germany	21Aaa	Stable	Jul 2011
Greece	02Ca	Negative	Jul 2011
Guatemala	11Ba1	Stable	Jul 2011
Honduras	07B2	Stable	Jul 2011
Hong Kong	20Aa1	Positive	Jul 2011
Hungary	12Baa3	Negative	Jul 2011
Iceland	12Baa3	Negative	Jul 2011
India	12Baa3	Stable	Jul 2011
Indonesia	11Ba1	Stable	Jul 2011
Ireland	11Ba1	Negative	Jul 2011
Isle of Man	21Aaa	Stable	Jul 2011
Israel	17A1	Stable	Jul 2011
Italy	19Aa2	Watch Negative	Jul 2011
Jamaica	06B3	Stable	Jul 2011
Japan	19Aa2	Watch Negative	Jul 2011
Jordan	10Ba2	Negative	Jul 2011
Kazakhstan	13Baa2	Stable	Jul 2011
South Korea	17A1	Stable	Jul 2011
Kuwait	19Aa2	Stable	Jul 2011
Latvia	12Baa3	Positive	Jul 2011
Lebanon	08B1	Stable	Jul 2011
Lithuania	14Baa1	Stable	Jul 2011
Luxembourg	21Aaa	Stable	Jul 2011
Macao	18Aa3	Stable	Jul 2011
Malaysia	15A3	Stable	Jul 2011
Malta	17A1	Stable	Jul 2011
Mauritius	13Baa2	Stable	Jul 2011
Mexico	14Baa1	Stable	Jul 2011
Moldova	06B3	Stable	Jul 2011
Mongolia	08B1	Stable	Jul 2011
Montenegro	09Ba3	Stable	Jul 2011
Morocco	11Ba1	Stable	Jul 2011
Netherlands	21Aaa	Stable	Jul 2011
New Zealand	21Aaa	Stable	Jul 2011
Nicaragua	06B3	Stable	Jul 2011
Norway	21Aaa	Stable	Jul 2011
Oman	17A1	Stable	Jul 2011
Pakistan	06B3	Stable	Jul 2011
Panama	12Baa3	Stable	Jul 2011
Papua New Guinea	08B1	Stable	Jul 2011
Paraguay	08B1	Stable	Jul 2011
Peru	12Baa3	Positive	Jul 2011
Philippines	10Ba2	Stable	Jul 2011
Poland	16A2	Stable	Jul 2011
Portugal	10Ba2	Negative	Jul 2011
Qatar	19Aa2	Stable	Jul 2011
Romania	12Baa3	Stable	Jul 2011
Russia	14Baa1	Stable	Jul 2011
Saudi Arabia	18Aa3	Stable	Jul 2011
Senegal	08B1	Stable	Jul 2011
Singapore	21Aaa	Stable	Jul 2011
Slovakia	17A1	Stable	Jul 2011
Slovenia	19Aa2	Stable	Jul 2011
South Africa	15A3	Stable	Jul 2011
Spain	19Aa2	Negative	Jul 2011
Sri Lanka	08B1	Positive	Jul 2011
St. Vincent & the Grenadines	08B1	Stable	Jul 2011
Suriname	08B1	Stable	Jul 2011
Sweden	21Aaa	Stable	Jul 2011
Switzerland	21Aaa	Stable	Jul 2011
Taiwan	18Aa3	Stable	Jul 2011
Thailand	14Baa1	Stable	Jul 2011
Trinidad and Tobago	14Baa1	Stable	Jul 2011
Tunisia	12Baa3	Negative	Jul 2011
Turkey	10Ba2	Positive	Jul 2011
Ukraine	07B2	Stable	Jul 2011
United Arab Emirates	19Aa2	Stable	Jul 2011
United Kingdom	21Aaa	Stable	Jul 2011
United States of America	21Aaa	Watch Negative	Jul 2011
Uruguay	11Ba1	Stable	Jul 2011
Venezuela	07B2	Stable	Jul 2011
Vietnam	08B1	Negative	Jul 2011

Not rated

UN member states that have not been assigned a credit rating by any of the three major rating agencies.

Country	Details
Afghanistan
Algeria
Antigua and Barbuda
Bhutan
Brunei Darussalam
Burundi
Central African Republic
Chad
Comoros
Congo
Democratic Republic of Congo
Cote d’Ivoire
Djibouti
Dominica
Equatorial Guinea
Eritrea
Ethiopia
Gambia	Fitch has suspended Gambia’s credit rating after its only traded international bond expired.
Guinea
Guinea-Bissau
Guyana
Haiti
Iran	Fitch has withdrawn all ratings for Iran following the maturity and full repayment of the last outstanding sovereign eurobond on 21 April 2008.
Iraq
Kiribati
North Korea
Kyrgyzstan
Laos
Liberia
Libya	Fitch has withdrawn all ratings for Libya because it doesn’t have enough information to maintain coverage of the issuer.
Madagascar
Malawi
Maldives
Mali	Mali was given a credit rating in 2004 as part of a UN development initiative, but the rating was later withdrawn.
Marshall Islands
Mauritania
Federated States of Micronesia
Monaco
Myanmar
Nauru
Nepal
Niger
Palau
Saint Kitts and Nevis
Saint Lucia
Samoa
Sao Tome and Principe
Sierra Leone
Solomon Islands
Somalia
South Sudan
Sudan
Swaziland
Syria
Tajikistan
Tanzania
Timor Leste
Togo
Tonga
Turkmenistan	Moody has withdrawn its rating because it had insufficient information to maintain coverage of the issuer.
Tuvalu
Uzbekistan	The Uzbek government aims to obtain a sovereign credit rating by 2015.
Vanuatu
Yemen
Zimbabwe

By Wikipedia,
the free encyclopedia

http://en.wikipedia.org/

A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by credit rating agency of the debt issuers likelihood of default. Credit ratings are determined by credit ratings agencies. The credit rating represents the credit rating agency’s evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts. Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government. The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations.

Credit ratings are often confused with credit scores. Credit scores are the output of mathematical algorithms that assign numerical values to information in an individual’s credit report. The credit report contains information regarding the financial history and current assets and liabilities of an individual. A bank or credit card company will use the credit score to estimate the probability that the individual will pay back loan or will pay back charges on a credit card. However, in recent years, credit scores have also been used to adjust insurance premiums, determine employment eligibility, as a factor considered in obtaining security clearances and establish the amount of a utility or leasing deposit.

A poor credit rating indicates a credit rating agency’s opinion that the company or government has a high risk of defaulting, based on the agency’s analysis of the entity’s history and analysis of long term economic prospects. A poor credit score indicates that in the past, other individuals with similar credit reports defaulted on loans at a high rate. The credit score does not take into account future prospects or changed circumstances. For example, if an individual received a credit score of 400 on Monday because he had a history of defaults, and then won the Powerball on Tuesday, his credit score would remain 400 on Tuesday because his credit report does not take into account his improved future prospects.

Credit scores

An individual’s credit score, along with his credit report, affects his or her ability to borrow money through financial institutions such as banks.

The factors that may influence a person’s credit score are:

- ability to pay a loan
- interest
- amount of credit used
- saving patterns
- spending patterns
- debt

In different parts of the world different personal credit score systems exist.

North America

In the United States, an individual’s credit history is compiled and maintained by companies called credit bureaus. Credit worthiness is usually determined through a statistical analysis of the available credit data.

- A common form of this analysis is a 3-digit credit score. The most common form of credit score, know as the FICO credit score, was developed by Fair Isaac Corporation, however, the actual score is computed by credit bureaus.
- The term FICO is a registered trademark of Fair Isaac Corporation, which pioneered the credit rating concept in the late 1950s.

In Canada, individuals actually receive credit ratings such as the North American Standard Account Ratings, also known as the "R" ratings, which have a range between R0 and R9. R0 refers to a new account; R1 refers to on-time payments; R9 refers to bad debt. Very few people maintain the R0 status for long, as there are similar mechanisms in place in Canada that would allow for monthly updates of one’s credit rating.

Australasia (Australia and NZ)

In Australia, The Australian Government "Office of the Privacy Commissioner" provides information on how to obtain a copy of your credit report. Personal credit reports in Australia are generally required to be given free of charge.

There are two main credit reporting agencies, "Veda Advantage" and "Dun & Bradstreet"

People living in Tasmania can also contact "Tasmanian Collection Service"

Corporate credit ratings

The credit rating of a corporation is a financial indicator to potential investors of debt securities such as bonds. Credit rating is usually of a financial instrument such as a bond, rather than the whole corporation. These are assigned by credit rating agencies such as A.M. Best, Dun & Bradstreet, Standard & Poor’s, Moody’s or Fitch Ratings and have letter designations such as A, B, C. The Standard & Poor’s rating scale is as follows, from excellent to poor: AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, CC, C, D. Anything lower than a BBB- rating is considered a speculative or junk bond. The Moody’s rating system is similar in concept but the naming is a little different. It is as follows, from excellent to poor: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C. A.M. Best rates from excellent to poor in the following manner: A++, A+, A, A-, B++, B+, B, B-, C++, C+, C, C-, D, E, F, and S. The CTRISKS rating system is as follows: CT3A, CT2A, CT1A, CT3B, CT2B, CT1B, CT3C, CT2C and CT1C. All these CTRISKS grades are mapped to one-year probability of default.

S&P’s ratings of European countries (June 2011).

Sovereign credit ratings

A sovereign credit rating is the credit rating of a sovereign entity, i.e. a national government. The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors looking to invest abroad. It takes political risk into account.

The table shows the ten least-risky countries for investment as of September 2010. Ratings are further broken down into components including political risk, economic risk. Euromoney’s bi-annual country risk index "Country risk survey" monitors the political and economic stability of 185 sovereign countries. Results focus foremost on economics, specifically sovereign default risk and/or payment default risk for exporters (a.k.a. "trade credit" risk).

A.M. Best defines "country risk" as the risk that country-specific factors could adversely affect an insurer’s ability to meet its financial obligations.

Short-term rating

A short-term rating is a probability factor of an individual going into default within a year. This is in contrast to long-term rating which is evaluated over a long timeframe. In the past insitutional investors preferred to consider long-term ratings. Nowadays, short-term ratings are commonly used. First, the Basel II agreement requires banks to report their one-year probability if they applied internal-ratings-based approach for capital requirements. Second, many institutional investors can easily manage their credit/bond portfolios with derivatives on monthly or quarterly basis. Therefore, some rating agencies simply report short-term ratings. In Greater China, CTRISKS is the first CRA providing short-term ratings on sovereign risk, bank risk and corporations in the region.

Credit bureaus and credit rating agencies

Credit scores for individuals are assigned by credit bureaus (US; UK: credit reference agencies). Credit ratings for corporations and sovereign debt are assigned by credit rating agencies.

In the United States, the main credit bureaus are Experian, Equifax, and TransUnion. A relatively new credit bureau in the US is Innovis.

In the United Kingdom, the main credit reference agencies for individuals are Experian, Equifax, and Callcredit. There is no universal credit score as such, rather each individual lender credit scores based on its own wish-list of a perfect customer.

In Canada, the main credit bureaus for individuals are Equifax, TransUnion and Northern Credit Bureaus/ Experian.

In India, commercial credit rating agencies include CRISIL, CARE, ICRA and Brickwork Ratings. The credit bureaus for individuals in India are Credit Information Bureau (India) Limited (CIBIL) and Credit Registration Office (CRO).

In Hong Kong, the locally-based credit rating agency is CTRISKS. The firm offers sovereign ratings on major economies, bank ratings on banks in China, Taiwan, Hong Kong and Macau, obligor ratings on 4000 listed companies in Greater China, bonds ratings on 1000+ bonds in China, Taiwan and Hong Kong and product risk ratings on 1000+ investment products.

The largest credit rating agencies (which tend to operate worldwide) are Dun & Bradstreet, Moody’s, Standard and Poor’s and Fitch Ratings.

On 14.07.2010 Dagong International Credit Rating Co. from China released a credit rating that is a break with other western credit rating agencies in an attempt to compete with them.

Information and Rating Agency Credo Line is the only Rating Agency in Ukraine which assigns short-term and long-term credit ratings to Ukrainian, CIS and Eastern-European importing companies in the course of their foreign economic activity and trade financing, in particular.

By Wikipedia,
the free encyclopedia

http://en.wikipedia.org/

In investment, the bond credit rating assesses the credit worthiness of a corporation’s or government debt issues. It is analogous to credit ratings for individuals. The credit rating is a financial indicator to potential investors of debt securities such as bonds. These are assigned by credit rating agencies such as Moody’s, Standard & Poor’s, and Fitch Ratings to have letter designations (such as AAA, B, CC) which represent the quality of a bond. Bond ratings below BBB/Baa are considered to be not investment grade and are colloquially called junk bonds.

Credit rating agencies

Credit rating agencies registered as such with the SEC are known as “Nationally Recognized Statistical Rating Organizations.” The following firms are currently registered as NRSROs: A.M. Best Company, Inc.; DBRS Ltd.; Egan-Jones Rating Company; Fitch, Inc.; Japan Credit Rating Agency, Ltd.; LACE Financial Corp.; Moody’s Investors Service, Inc.; Rating and Investment Information, Inc.; and Standard & Poor’s Ratings Services. Under the Credit Rating Agency Reform Act, an NRSRO may be registered with respect to up to five classes of credit ratings: (1) financial institutions, brokers, or dealers; (2) insurance companies; (3) corporate issuers; (4) issuers of asset-backed securities; and (5) issuers of government securities, municipal securities, or securities issued by a foreign government.

S&P, Moody’s, and Fitch dominate the market with approximately 90-95 percent of world market share.

Credit Rating Tiers

Moody’s assigns bond credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C, with WR and NR as withdrawn and not rated. Standard & Poor’s and Fitch assign bond credit ratings of AAA, AA, A, BBB, BB, B, CCC, CC, C, D.

As of April 2011, there were 4 companies rated AAA by S&P:

- Automatic Data Processing (NYSE:ADP)
- Johnson & Johnson (NYSE:JNJ)
- Microsoft (NASDAQ:MSFT)
- ExxonMobil (NYSE:XOM)

Moody’s, S&P and Fitch will all also assign intermediate ratings at levels between AA and CCC (e.g., BBB+, BBB and BBB-), and may also choose to offer guidance (termed a "credit watch") as to whether it is likely to be upgraded (positive), downgraded (negative) or uncertain (neutral).

Investment grade

A bond is considered investment grade or IG if its credit rating is BBB- or higher by Standard & Poor’s or Baa3 or higher by Moody’s or BBB(low) or higher by DBRS. Generally they are bonds that are judged by the rating agency as likely enough to meet payment obligations that banks are allowed to invest in them.

Ratings play a critical role in determining how much companies and other entities that issue debt, including sovereign governments, have to pay to access credit markets, i.e., the amount of interest they pay on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for issuers’ borrowing costs.

Bonds that are not rated as investment-grade bonds are known as high yield bonds or more derisively as junk bonds.

The risks associated with investment-grade bonds (or investment-grade corporate debt) are considered noticeably higher than in the case of first-class government bonds. The difference between rates for first-class government bonds and investment-grade bonds is called investment-grade spread. It is an indicator for the market’s belief in the stability of the economy. The higher these investment-grade spreads (or risk premiums) are, the weaker the economy is considered.

Criticism

Until the early 1970s, bond credit ratings agencies were paid for their work by investors who wanted impartial information on the credit worthiness of securities issuers and their particular offerings. Starting in the early 1970s, the "Big Three" ratings agencies (S&P, Moody’s, and Fitch) began to receive payment for their work by the securities issuers for whom they issue those ratings, which has led to charges that these ratings agencies can no longer always be impartial when issuing ratings for those securities issuers. Securities issuers have been accused of "shopping" for the best ratings from these three ratings agencies, in order to attract investors, until at least one of the agencies delivers favorable ratings. This arrangement has been cited as one of the primary causes of the subprime mortgage crisis (which began in 2007), when some securities, particularly mortgage backed securities (MBSs) and collateralized debt obligations (CDOs) rated highly by the credit ratings agencies, and thus heavily invested in by many organizations and individuals, were rapidly and vastly devalued due to defaults, and fear of defaults, on some of the individual components of those securities, such as home loans and credit card accounts.

Municipal Bonds

Municipal bonds, instruments issued by local, state, or federal governments in the United States, have a separate naming/classification system which mirrors the tiers for corporate bonds.

Default Rates

The historical default rate for municipal bonds is lower than that of corporate bonds. The Municipal Bond Fairness Act (HR 6308), introduced September 9, 2008, included the following table giving bond default rates up to 2007 for municipal versus corporate bonds by rating and rating agency.

A potential misuse of historic default statistics is to assume that historical average default rates represent the "probability of default" of debt in a particular rating category. However, [...] default rates can vary significantly from one year to the next and the observed rate for any given year can vary significantly from the average.

Published - August 2011

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