ABSTRACT
Major credit rating agencies have been recently much criticised and have been accused for having brought many ills to the rating industry, to the point where it is currently wondered whether credit ratings were not flawed. Methodologies of the top three CRAs to sovereign solvency assessment lend themselves to serious critics, as they are very similar. Agencies are, for instance, blamed for a number of shortcomings, particularly their way of assessing and expressing default, as seen in Chapter 6. For their part, CRAs are constantly arguing that ratings are not a market’s perception of the probability of default and that their ratings’ sole objective is to express ordinal risk rankings only and do not seek any other ranking objective, if only ratings were not used for evaluating debt securities, based on the risk-return rule. This chapter tests the possibility that CRAs may rate sovereign debt inaccurately and concludes that the methodologies used, presented in Chapter 6, may influence their sovereign ratings. This chapter should be read in conjunction of Chapters 2 and 6, and any limit in agencies model, discovered, adds up to agencies ratings classical limits.
