1. Meaning of credit evaluation
It is a relative indicator that classifies the creditworthiness of individual economic entities into specific numerical values and grades and summarizes how reliable they are. Credit evaluation materials are basic materials for judging how trustworthy a counterparty can be in the event that the parties to the transaction do not know each other well. This is because a third party objectively evaluates a transaction involving uncertainty and minimizes the risk based on the credit rating of the counterparty. Credit evaluation can be divided into credit evaluation for individuals and corporate nations.
2. The world's three largest credit rating agencies
Credit ratings exist not only for individuals, but also for countries. National credit ratings are evaluated by credit rating agencies. Standard and Poor's and Moody's in the United States and Fitch Ratings in the United Kingdom are the three major credit rating agencies that assess the country's credit rating. The long-term credit rating they assign to a country is used by domestic financial institutions and companies to determine interest rates and assess the possibility of issuing bonds overseas. In addition, the institution will consider the economic and political stability and sudden variables of each country in order to evaluate the creditworthiness of the nation. Credit grades are generally divided into 10 grades for investment grade, and the method of displaying the grades differs for each evaluation agency. Next, let's take a look at the world's three largest credit rating agencies.
1) Pitch IBCA
The company was formed in 1997 by merging IBCA, which is famous for credit rating of 650 non-American financial institutions and 50 countries, and Fitch, which is known for financial evaluation. The parent company is in French blood. In the case of long-term credit grades that apply to long-term loans with a redemption period of 1 year or more, the grades from ``AAA'' to ``BBB-'', which is in a potentially unstable state, are investment grade, and ``BB+'' and below are classified as non-investment grade. doing. Also, within the same grade, + and - are generally superior or inferior. Classified by short-term credit rating applied to short-term claims with a maturity of less than one year.
2) Moody's
A credit rating agency founded by John Moody in 1990, it emerged as one of America's leading credit rating agencies by announcing ratings for over 200 railroad bonds in 1909 for the first time in the United States. Moody's assumes that long-term credit grades applied to long-term receivables with a maturity of one year or more are classified as investment grade from 'Aaa' to 'Baa', and those below 'Ba' are non-investment grade. Within the same grade, 1, 2, and 3 indicate superiority and inferiority. Short-term credit ratings applied to short-term loans with a maturity of less than one year are classified into prime1 (P-1), prime2 (P-2), prime3 (P-3), and notrade (NT).
3) Standard & Poor's (S&P)
In 1941, Poor's and StandardStatistics merged to form today's S&P, which is now a subsidiary of McGraw-Hill. Political situation, Economic structure, Formulation of economic growth prospects, Operation, Public debt, External debt, Repayment capacity of commodity debt, △31 items of investment environment for 60 countries around the world. Investigate, classify and announce. The long-term credit rating applied to long-term loans with a maturity of one year or more is investment grade from ``AAA'' to ``BBB-'', which is in a potentially unstable state, and ``BB+'' or lower is not investment grade. Classified, and within the same grade, "+" and "-" are generally classified. In addition, the short-term credit grades applied to short-term receivables with a maturity of less than one year are classified into A-1, A-2, A-3, B, and C.
3. Finish
Just as an individual with a bad credit rating becomes a credit delinquent, a nation also becomes a credit delinquent state if its credit rating is poor. If it becomes a bad credit nation, there will be a huge economic crisis and the nation will sway. So I think managing credit ratings is a very important part. If the economy is in such dire straits, in the worst case, the country could go bankrupt, so it's important to manage credit ratings well.
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