Transcript

Making the Grade: Credit Ratings by Country

MAKING GRADE Sovereign credit ratings express the ability and willingness of an issuer – in this case, countries – to meet its financial obligations in full and on time. In Standard & Poor's most recent assessment of global credit ratings, many of the countries that were once considered the strongest lenders are now suffering a negative outlook. So before you throw your life savings into the wrong country's piggy bank, take a look at the assessments below. THE AAA CREDIT RATINGS BY COUNTRY THE RATING SYSTEM The credit ratings used by Standard & Poor's are relative opinions about the creditworthiness of an issuer. The ratings are broken down into alphabetic grades, similar to those you received in grammar school. THE GRADES INVESTMENT GRADE SPECULATIVE GRADE Investment grade has usually referred to bonds and other debt securities that bank and market participants view as suitable for investment. Speculative grade usually refers to issuers who have the ability to repay but face significant uncertainties. Countries that receive a grade 'BBB-' or higher are considered to be healthy areas for investment. Highest Rating. AAA Extremely strong BB+ Highest Speculative Grade Bankruptcy petition has been filed Major uncertainties, less BB vulnerable in the near-term AA Very Strong D Default on payments Strong but susceptible to More vulnerable to adverse T&C A adverse economic conditions economic conditions According to Standard & Poor's, a T&C assessment is the rating associated with the likelihood of the sovereign restricting nonsovereign access to foreign exchange needed for debt service. For most countries this risk is less than the risk of sovereign default on foreign-currency obligations; thus the T&C rating tends to be higher than the Foreign Currency Rating. BBB Adequate but susceptible to adverse economic conditions CCC Currently vulnerable CC Currently highly vulnerable BBB- Lowest Investment Grade KEY The outlook tells of the possibility that an entity's credit rating has of changing in the near future BBB Stable: There is no expected rating change in the near future Negative: The credit rating will be downgraded within two years if internal financial issues are not solved Negative Watch: There is a 50% chance of a credit rating downgraded in the next 90 days BB AA FOREIGN RATING FOREIGN RATING REIGN CURR AAA FOREIGN CURRENCY AAA AAA RATING B- FOREIGN CURRENCY OUTLOOK BBB to AA+ OUTLOOK TOP GDPS AAA AAA TRANSFER & BBB- ASSESSMENT AA CONVERTIBILITY Being a top earner does not guarantee a solid credit rating. These selected countries are all in the top 20 of the global GDP. BB B- to BB+ BBB $14.7 TRILLION $5.9 TRILLION $5.5 TRILLION $3.3 TRILLION $2.6 TRILLION $2.3 TRILLION RENCY R CURRENCY RAT CURRENCY FOREIGA AAA N CURRE AA- OREIGA AA- FOREIGN AAA FOREION TRATING AAA FOREIGN NEGATIVE STABLE NEGATIVE STABLE STABLE STABLE AAA AAA EC ASSESSMEN AAA EC ASSESSMEN AAA AAA C ASSESSMEN AA- EC ASSESSMENT C ASSESSMEN C ASSESSMENT UNITED STATES CHINA JAPAN GERMANY FRANCE UNITED KINGDOM $2.1 TRILLION $2.1 TRILLION $1.6 TRILLION $1.5 TRILLION $1.5 TRILLION FOREION CORRENCY RATING FOREIO NGT RATING STABLE FORE ENCT RATING STABLE FORERR AING STABLE FOREION CORRENCY RATING BBB- A+ AAA BBB STABLE STABLE BBB+ EC ASSESSMENT BBB C ASSESSMENT AAA AAA C ASSESSMENT BBB+ EC ASSESSMENT CASSESSMENT BRAZIL ITALY CANADA INDIA RUSSIA SOVEREIGN NATIONS Standard & Poor's Ratings Services currently rates 126 sovereign governments and has established transfer and convertibility (T&C) assessments for each country with a rated sovereign. SPECULATIVE GRADE These countries have been given either the lowest possible investment grade or speculative grade. Their negative outlook makes foreign investors vulnerable to higher risk and various COLOMBIA PORTUGAL ICELAND TUNISIA GREECE REIGN CONNENCY RATING FOREI DKATING FOREIGN CORRENCY RATING FOREIGN CURRENCY RATING N CURRENCY RATING BBB- BBB- BBB- BBB- FOREIGN STABLE NEGATIVE NEGATIVE WATCH STABLE NEGATIVE WATCH BBB+ EC ASSESSMENT AAA EC ASSESSMENT BBB- EC ASSESSMENT BBB C ASSESSMEN AAA EC ASSESSMEN uncertainties, This ultimately hurts the country's economy, as the poor rating adversely affects $285.5 BILLION $229.3 BILLION $12.5 BILLION $44.3 BILLION $305.4 BILLION business and trade. HUNGARY CROATIA JORDAN EGYPT FOREION CORRENCY RATING NEGATIVE FOREIGN CURRENCY RATING FORB DDING NEGATIVE FORE DRAING NEGATIVE BBB- BBB- NEGATIVE A- EC ASSESSMENT BBB+ &C ASSESSMENT BBB- EC ASSESSMENT BB+ EC ASSESSMENT $129 BILLION $60.6 BILLION $27.5 BILLION $218.5 BILLION Sources: Sovereign Ratings and Country T&C Assessments Sovereigns Rating List International Monetary Fund 2010 mint investopedia.com .com

Making the Grade: Credit Ratings by Country

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Credit rating agency Standard & Poor’s recently lowered its outlook on U.S. debt to “negative,” suggesting that the United States’ top-flight “AAA” credit rating is vulnerable to a downgra...

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