August 1, 2001
Long- and short-term credit ratings provide an opinion on the ability of an entity to meet financial commitments such as interest, preferred dividends or repayment of principal on a timely basis. The ratings, which are comparable worldwide, are assigned to sovereigns, governments, structured financings and corporations including banks, as well as debt, preferred stock, bank loans and counterparties.
Certain rating agencies have also developed a specialized rating scale for banks (Fitch's "Individual" rating and Moody's "Financial Strength" rating for example) that assess the likelihood that a bank will face financial difficulties and in the event that this happens, the likelihood that
A broader choice of rating scales for the emerging markets is good news for Latin American banks, which previously were constrained by sovereign ceilings. Investors now have a better measure of relative risk within a specific country.