Moody's Announces Changes in Country Ceilings Following Methodology Update

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Thursday, December 10, 2020 / 11:14 AM / by Moody's Investors Service / Header Image Credit: Livemint

 

Moody's Investors Service has changed a number of country ceilings following the update of the country ceilings methodology.

 

Moody's has raised 39 and lowered 15 local currency country ceilings, over half by one notch. It has raised 35 and lowered 25 foreign currency country ceilings, in around half these cases by one notch.


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Assessment Rationale 

With these changes, local currency ceilings are set from zero to six notches above the sovereign rating, for the majority of countries three or more notches higher. Foreign currency ceilings are between zero and three notches below the local currency ceiling, in the vast majority of cases no more than two notches below.

 

While the particular drivers of changes in ceilings with the implementation of the methodology update are country specific, higher local-currency ceilings generally reflect Moody's assessment that the government, through its footprint and actions, poses lower risk to other issuers than previously estimated. In some cases, higher local currency ceilings also reflect an updated assessment of the risks to issuers across the country posed by the political environment. Lower local-currency ceilings similarly reflect an updated assessment of the role of the government and/or political risk as drivers of ceiling risks. For a few countries, lower local currency ceilings also take into account the risks posed by reliance on a common source of revenue, often commodities or tourism, for both the government and private sector issuers.

 

The changes in foreign currency ceilings reflect Moody's updated assessment of indications that policy effectiveness, capital account openness and external indebtedness give about the probability of a government imposing transfer and convertibility restrictions should the need or incentives to do so emerge.

 

Moody's has decided to withdraw all local currency and foreign currency deposit ceilings, short-term ceilings, and offshore banks ceilings for its own business reasons.

 

The methodology used in these analyses was Country Ceilings Methodology published in December 2020 and available here


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