8
$\begingroup$

Does the "issuer-pay" model hold also for sovereign credit ratings? Do States pay for having their bond being rated?

$\endgroup$
  • $\begingroup$ good question .. not "too" quant but good ;) $\endgroup$ – Richard May 27 '16 at 18:25
  • $\begingroup$ any idea where I can find an answer?! $\endgroup$ – Elena De Falco May 30 '16 at 11:48
  • 1
    $\begingroup$ If this was for me: no, no idea. And my remark was not sarcastic only .. ;) it really is a good question. $\endgroup$ – Richard May 30 '16 at 18:04
2
$\begingroup$

The "issuer-pay" model works like this: The Rating Agency goes to the issuer and says "We heard that you are going to issue bonds. We can give you a rating if you pay us XXX dollars. It will help you a lot to have our rating". The Issuer of course is free to refuse this offer (after all this is just a rating agency, not the Cosa Nostra). In this case the rating agency can still rate the issuer if it wants to (for a variety of reasons, for example to allow comparison with other issuers). I believe the big countries (United Kingdom, USA, etc.) fall in the latter case: they never pay for ratings, so they are rated gratis (at no charge). In general it will depend on the country's judgement of whether they need a rating or not.

$\endgroup$
  • $\begingroup$ It is quite disconcerting to read the most famous italian Mafia Group here, since i'm italian and passionate crime-films watcher. But this is off topic. I think all rated countries pay for the rating, otherwise, if I don't pay for a rating but i'm rated anyway, no one will pay for a rating. $\endgroup$ – simmy May 28 '16 at 6:25
  • 1
    $\begingroup$ Could you provide me some paper or some relevant and reliable sources talking about this topic? Because I cannot find anything on the web, and there are a lot of people claiming for the contrary.. $\endgroup$ – Elena De Falco May 30 '16 at 11:47

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.