During the traumatic financial crisis that began in 2008, the rating agencies deserved special mention for the error of rating subprime mortgages in the US with the best solvency grade, the triple A, and also for their enormous influence in measuring the credit quality of European countries at the worst times for sovereign debt.
Fifteen years later, the old acquaintances S
“In 2008, financial engineering was developed in which the investment banks were ahead of the agencies, which did not want to lose the market,” explains Adolfo Estévez, general director of EthiFinance, the former Axesor and the main rating evaluator. in Spain, with 90% of the Marf debt market (alternative fixed income market).
“After the crisis, agencies have redefined methodologies to apply them constantly and strictly. Now the method is simple, transparent and standard. It went from the Wild West to something boring, which is what it has to be,” he says.
The EU has approved six regulations so that the methodology of these agencies is public and so that the rating of the countries is reviewed outside of market hours and according to a pre-established calendar. New risk models have also been established, including ESG (environmental, social and governance) and regulatory criteria supervised by the European Securities and Markets Authority (Esma). Added to this is the entry of new competitors, such as the German Scope, and the consolidation of EthiFinance in Spain.
Santiago Carbó, professor of Economics at the University of Valencia and director of Financial Studies at Funcas, explains that in recent years the rating agencies “have not given importance to sovereign or corporate debt” due to the pandemic and the invasion of Ukraine. , but “a change of perception could occur in the event of some type of setback or unforeseen event.”
His impression is that rating agencies “have been becoming more refined and losing procyclicality” in recent years. “Ten years ago they exacerbated the cycle, which was bearish, thereby aggravating the situation” with their decisions. This is no longer the case and your credit reviews look more long-term. It is only a small consolation because, in his opinion, the moment is uncertain and what is needed is for countries like Spain to focus on “doing their homework” in the face of the risk of turbulence.
José Carlos Díez, professor of Economics at the University of Alcalá, believes that there is too much complacency. “The markets don’t get nervous until someone’s rating is lowered,” but the agencies “don’t seem very concerned about the current stock of debt.” “I have not seen a greater relaxation of the agencies. They collaborated in the undervaluation of risk before 2007 and now they do so in the dynamics of public debt,” he says.
In the case of Spain, the last rating revisions occurred in 2018 and were for the better, after the country had been, in the case of Moody’s and during the worst years of the economic crisis, just one notch away from the junk bond, which is what the degree of speculation is known as. The trauma of 2008 and its echoes have put an end to many myths, among them that of the US triple A: S
And what do the rating agencies think about what is to come in 2024? The general director and head of Corporate Ratings Analysis in Europe at S
In its 2024 forecast report, Moody’s has a “stable outlook” for sovereign debt, but says it will be a “difficult year as high debt levels consolidate, growth falters” and “governments face a delicate balance to settle their accounts.”
In its latest ‘Risk Radar’, Fitch says that the international credit environment “has deteriorated” due to “rising interest rates, the accentuation of geopolitical risks and the sudden resurgence of large-scale military conflicts.” They are generic assessments that could be translated into specific actions regarding some issuers.
