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Essay / Research Paper Abstract
This 9 page paper examines the way in which agencies such as Standard and Poor and Moodys determine sovereign credit ratings. The paper looks at the different factors such as GDP growth, payment history, debt levels etc. and how they may influence the rating along with the impact of a rating change. The bibliography cites 2 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEsovcredit.rtf
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Unformatted sample text from the term paper:
or not to grant a loan and also determining what rate of interest should be charged as the risk premium for the loan. If the situation of a bank looking
at lending to a customer they will look at a range of factors, such as ability to repay the loan, past credit history and existing outstanding loans, potential future influences
and general risk. These are all used in different weightings in order to create a credit rating that is used of make the lending decision. If we look at
the global economy it is not only the individual and companies that borrow money. Where a country has a budget that does not balance or wants to make investments there
may need to be borrowing. This may occur internally with the issues of gilt or government bonds, but may also need to be borrowed externally form one of hte major
banks or from other countries or organisations. Just as individuals need to be rated in terms of creditworthiness, so do sovereign states. The need for sovereign ratings is increasing as
a result of the growth of globalisation (Bissoondoyal-Bheenick, 2005). The need for ratings may be seen as more complex, but also more open due to the many for of data
that are required, There are two main agencies that conduct this type of rating; Standard and Poor and Moodys (Bissoondoyal-Bheenick, 2005, Cantor and Packer, 1996). Standard and Poor are the
oldest ratings agency, having been giving sovereign credit ratings since 1961, Moodys only started offering this service in 1974. (Bissoondoyal-Bheenick, 2005). These are the main agencies that are used and
referred to internationally. Just as with other forms of credit ratings, the sovereign credit ratings are the assessment of the sovereign state as a credit risk, assessing whether or
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