Kreditrating

Kreditrating, or credit rating, is an assessment of the creditworthiness of a borrower or debt instrument produced by independent rating agencies. It expresses the agency's view on the likelihood that the issuer will meet its financial obligations as they come due. Ratings influence perceived risk and funding costs in capital markets.

Rating process: Agencies analyze financial statements, cash flow, leverage, business model, industry conditions, governance, and macroeconomic factors. They combine quantitative models with qualitative judgments and review by a rating committee. Ratings can apply to issuers (issuer ratings) or specific debt issues (bond ratings).

Scales and meaning: The major global agencies publish letter scales. S&P and Fitch use AAA to D, with plus/minus modifiers in the upper ranges; Moody's uses Aaa to C with numerical modifiers. Higher ratings imply lower credit risk and typically lower interest rates demanded by lenders.

Uses and regulatory context: Investors use ratings to assess risk, diversify portfolios, and meet internal or regulatory requirements. Issuers use ratings to access funding and determine pricing. Some regulatory frameworks formerly linked capital requirements to external ratings, though reliance has evolved toward internal risk assessments.

Limitations: Ratings are opinions, not guarantees; they lag behind events and can be wrong. Conflicts of interest, especially in issuer-paid models, and potential for rating shopping are noted criticisms. Ratings do not capture all risks, such as liquidity or market risk.

Notable agencies: Moody's Investors Service, Standard & Poor's, Fitch Ratings; others include DBRS Morningstar, Japan Credit Rating Agency, and Rating and Investment Information, Inc. (R&I).