ABSTRACT

Sovereign credit ratings, SCR, are evaluations of the creditworthiness of governments and are determined by specialised private institutions, called credit rating agencies, CRA. The main use of sovereign credit ratings is to orient investors in government bonds investment; to help them assess the likelihood that the sovereign issuer will be able to face its debt financial obligations. Sovereign credit ratings may also play another determining role, especially for emerging and developing countries. They may give investors confidence in investing in emerging and developing environments seeking foreign capital and therefore in need of demonstrating transparency and credit standing. Although sovereign credit ratings may play a major role in global capital allocation and efficiency, they were recently subject of controversies. Three major agencies, Fitch Ratings, Moody’s Investors Service and Standard & Poor’s (S&P), together called the Big 3, dominate the global credit allocation, but are also blamed for many of its ills. The Big 3 were especially accused of opacity and recently subjected to legal monitoring. Among the Big 3, Moody’s seems to have improved more significantly its disclosure procedures and appears to constitute the best bet. For this reason and for simplification purpose, Moody’s and the Big 3 will be interchangeably used in this book and Moody’s should even be praised for its improved disclosure efforts.