Greece Outside In: Credit ratings: how Fitch, Moody's and S&P rate each country . Visualised

Friday, October 12, 2012

Credit ratings: how Fitch, Moody's and S&P rate each country . Visualised

Standard & Poor's has downgraded Spain's government bonds to just one notch above junk status. See how different credit ratings agencies rate countries worldwide
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How do credit ratings vary by country and by ratings agencies? Standard & Poor's has downgraded Spain's sovereign ratings to BBB-, just one grade above junk status.

The credit rating agency announced the decision on Wednesday, announcing:

The downgrade reflects our view of mounting risks to Spain's public finances, due to rising economic and political pressures. In our view, the capacity of Spain's political institutions (both domestic and multilateral) to deal with the severe challenges posed by the current economic and financial crisis is declining, and therefore, in accordance with our rating methodology, we have lowered the rating by two notches

Phillip Inman has more on the story here, where he writes:

S&P said it had lowered the rating on Spain's debts two notches following a slump in its fortunes that meant its recession would be longer and unemployment higher than expected.
S&P attached a "negative outlook" to its rating, a warning of another possible downgrade in the medium term.
Rival ratings agency Moody's is considering the situation in Madrid and is expected to issue its own downgrade within days.

Just days earlier Moody's cut its assessment of Cyprus's government bonds, downgrading them by one notch from Ba3 to B3. The ratings agency cited fragile and weakening banks as the main factor in its decision, stating:

In order to maintain appropriate domestic bank capital levels, the Cypriot government will likely need to provide financial support to the country's banks that could threaten the sustainability of the government's debt burden

Cyprus is the second country since the beginning of August to have its rating downgraded by Moody's. The agency now rates Slovenia's bonds at Baa2 down from A2.

Standard & Poor's also downgraded both countries' bond ratings, while Fitch did so for Slovenia but not Cyprus.

There was better news elsewhere, though, with South Korea's rating raised by all three agencies. In South America, Moody's upgraded both Peru and Ecuador.

The interactive map below by Thiagu from Chartsbin shows how countries are rated by each of the three ratings agencies as of 26 July. Colours indicate credit grades, from prime (blue) to highly speculative (red). Use the menu in the top left to switch between ratings from the different agencies.

Move your cursor over a country to see details of its rating and outlook, and click here for a larger version of the map.

In March the UK was given a warning by Fitch when the credit rating outlook was changed to negative, becoming the second ratings agency to put the treasured AAA rating at risk after Moody's made the same move. This signalled a "slightly greater than 50% chance" that Britain would lose its AAA rating with Fitch in the next two years.

In February, the UK had the outlook on its Aaa Moody's rating changed to negative in a range of adjustments by the major credit agency including downgrades for Italy, Malta, Portugal, Slovenia, Slovakia and Spain.

At that time, Moody's also announced France and Austria would share the same fate as the UK with their outlooks being changed to negative.

So, who are the ratings agencies? The big three agencies are Fitch, Moody's and Standard & Poors. What they do is assess how likely a borrower is to be able to repay its debts and help those trading debt contracts in the secondary market.

That means for those trading debt contracts such as Treasury gilts after they have been issued, ratings agencies help assess a fair price to charge. Ratings agencies have been criticised for having too much clout in jittery markets during the financial crisis. They were widely attacked for failing to warn of the risks posed by certain securities, in particular mortgage-backed securities.

Losing your rating or being downgraded can have a fatal effect on your country's ability to borrow money on the markets.

Thanks to the three big agencies, we can bring you the ratings of countries around the world as of today. Because each agency's approach is slightly different, we have colour-coded them in three broad categories too. All the ratings have been updated today. Ratings for previous updates this year and from 2011 are in the spreadsheet, so you can see how ratings have changed over time.

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