The international credit rating of Russia attracts close attention. However, the usefulness of this indicator is often called into question. Criticism also sounds to analytical organizations, in the depths of which a judgment is formed about the country's investment reliability.
Definition
A credit rating is an assessment of the ability of a private individual, corporation, region or state to fulfill its financial obligations. These indicators are created by professional analysts based on a large amount of information received from various sources. Ratings not only assess the current financial condition of a corporation or state, but also predict a change in the situation in the foreseeable future. The rating is in the form of a short letter code. The ratings are designed to assist potential investors and lenders in making decisions. A high rating indicates the financial reliability of the object for investing funds. Buyers of bills and bonds primarily pay attention to the credit rating of issuers of debt securities. Debtors with a high level of reliability usually offer a relatively low interest rate.
Sovereign Ratings
The credit rating of national governments has several features. Sovereign ratings take into account political factors and analyze the country's overall investment climate. Those wishing to invest in the economy of a state must first determine the level of associated risk. In accordance with the current rules, no company has the right to receive a credit rating higher than sovereign. In other words, a single organization cannot be more reliable than the country to which it belongs. In the preparation of sovereign ratings, special attention is paid to assessing the probability of a default on financial obligations.
International Agencies
There are companies specializing in the collection and analysis of information that allows you to judge the creditworthiness of legal entities and state entities. International rating agencies regularly publish their findings on the financial stability of 185 countries. They assess the ability of national governments to make timely payments of interest on debt instruments and determine the degree of investment risk.
States are the largest borrowers in global financial markets. In an effort to attract capital to the economy, governments issue debt securities and sell them on international trading floors. Sovereign borrowers also have the opportunity to apply for a loan to organizations such as the World Bank and the International Monetary Fund. In such cases, the ratings of reputable agencies often have a critical impact on the decision to grant a loan.
Objectivity
There are currently three globally recognized credit rating companies in the world: Fitch, S&P and Moody's. All of them were based in the USA. Three leading agencies control 95% of the global market in this business area.
When lowering the credit rating of Russia, doubts often arise about the political impartiality of these organizations. The largest analytical agencies are a powerful tool for economic influence. Their ratings provide guidance to millions of investors. Some are inclined to believe that Russia's credit rating is used as a means of restricting access to global capital markets. It is not difficult for an authoritative agency such as S&P to change investor sentiment overnight. An unreasonable downgrade of Russia’s credit rating may serve as masked economic sanctions.
Independence
International agencies have repeatedly been accused of manipulating data. A classic example is the story with an inadequately high sovereign rating of Greece. The reasons for such gross errors can lie both in the imperfection of the valuation methods and in the bias of the agency. The history of changes in the credit rating of Russia as a whole shows its compliance with economic realities. Lowering the level of investment reliability, as a rule, was associated with a drop in oil prices. However, the change for the worse in Russia's credit rating following the introduction of trade sanctions was contrary to the country's fundamental economic indicators.
Prospects
There is no reason to believe that analytical agencies never forget about objectivity and do not pursue hidden goals. Their independence from political authorities is also not proven. In addition, these organizations are not under pressure from competitors. For example, the global reputation of the Chinese agency Dagong can not be compared to S&P, Moody's or Fitch. In the future, Russia's credit rating will continue to be determined by the so-called Big Three.