It is necessary to somehow evaluate the state of affairs in the state. You can impartially judge purchasing power or consider a specific option for a particular case and be interested in what provides importance. For example, the probability of debt repayment. And from this point on, interest provides a credit rating and studies to establish it.
What is credit rating and research?
Credit ratings refer to the opinions of individual foreign and Russian rating agencies on the financial stability and creditworthiness of the financial sector of individual states within their own borders and internationally. To establish what value should be assigned, special studies are carried out, the purpose of which is to find out the economic situation within the country, to assess the amount of debts to be paid and the likelihood of their payment if they are issued at the time of the study. Creditworthiness is a parameter that measures the likelihood of a debt being repaid if you give a loan right now. Moreover, it is worth saying that rating is practiced not only in relation to individual states, but also to large companies. Therefore, creditworthiness is a concept that applies not only to individual countries, but also to private companies.
Who is exhibiting it?
Separate rating agencies that monitor the situation in the country are engaged in their compilation and nomination. They can observe either through the media and state statistics, or by combining them with the reports of their representatives. For example, some bureaus interact with a number of users of various companies (through surveys), as the
Better Business Bureau does
, while others try to limit themselves exclusively to the largest organizations.
Why are they needed?
Why are these ratings necessary? The fact is that they provide information to potential investors about the domestic state and state of affairs. Based on their opinions, many businessmen and companies decide whether to invest in a given state or organization.
Credit rating system
What credit rating systems exist? There are quite a lot of them and they are indicated in Latin. In general, there is a fairly wide variety of rating scales that use small letters, pluses and minuses, but only the main "framework" will be considered within the framework of the article:
- Rating AAA. The maximum level. It is understood that this country is the borrower with the highest level of creditworthiness. The financial situation is assessed as good and stable for a long time. The state fulfills its duties on time and is extremely low dependent on external factors of anthropogenic origin. Possible risks are minimal, the probability of default is close to zero.
- Rating AA. Very high creditworthiness. States that have a stable economic condition for a long time fall into this category. Such countries are also weakly dependent on negative changes in the global economy and have a low level of credit risks.
- Rating A. High creditworthiness. The economic condition of states from this category is assessed as good at this point in time. All obligations are fulfilled in due time. At the same time, countries have a low dependence on the negative changes that are taking place in the global economy. The level of credit risks is estimated as low.
- BBB rating. Relatively high level of creditworthiness. This rating indicates that the country's economic situation is pretty good. She can timely and fully fulfill her obligations. Moreover, the state is moderately dependent on negative changes in the global market. The probability of a credit risk is moderate.
- Rating BB. Satisfactory creditworthiness. These letters in the ranking indicate the states whose economic situation can be assessed as acceptable. They fully and timely fulfill their obligations and are moderately dependent on negative changes in the global economic market, but delays are possible with negative changes in the global economy. Credit risks are assessed as acceptable.
- Rating B. Low creditworthiness. The economic situation of this category of states is characterized as unstable, and the possibility of timely repayment of debts largely depends on the international situation. Credit risks in such countries are above average.
- CCC rating. Low creditworthiness. This includes states with an unsatisfactory economic situation. The ability to fulfill their obligations very much depends on changes in the macroeconomic environment. The level of credit risks is considered high. There is also a significant likelihood that obligations will not be fully or late.
- SS rating. Very low creditworthiness. The financial condition of the countries that are included in this category is unsatisfactory. Opportunities for them to fulfill their obligations are largely determined by changes in the external economic environment, and credit risks are very high. The probability of default is very high.
- Rating C. Poor creditworthiness. The economies of countries in this category are in extremely poor condition and have extremely high risks. As a rule, countries with a pre-default state are entered here.
- Rating D. Default. This includes countries that cannot service their obligations and, most likely, bankruptcy proceedings will be launched there. You should distinguish between these two indicators, because default is simply a refusal to pay your debts, theoretically it can be announced by the state, which can pay everything.
Say a word about Russia
Since each agency has its own rating scale, the same opinions do not exist. But overall, Russia's rating is BBB or BB. Not the best option, but not the most hopeless. So, the BBB rating indicates the presence of certain problems. But even in the expert community there is no unity. So, the rating of Russia is now at such a level that it can be upgraded if the country focuses on the development of science and the introduction of new technologies. And then the BBB rating will be raised to A. If this is not done, then a gradual decline awaits us.
Conclusion
As you can see, such seemingly simple letters can tell a lot. Behind them is the work of many people who collect and analyze the necessary information. And let's hope that the BBB rating assigned to Russia by many agencies at the moment will change to the best.