Ratings Companies Reacted Slowly to Covid Crisis, Research Shows
- Main agencies reviewed sovereigns only when scheduled
- Lower rate of downgrades than for Lehman; worry for stability
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Ratings companies reacted slowly to the Covid-19 crisis, raising questions about the reliability of creditworthiness scores and their impact on financial stability, according to the first study into the effect of the pandemic on sovereign ratings.
The paper, to be published by the International Review of Financial Analysis, shows the largest three rating agencies (S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings) only reviewed sovereign scores when they were scheduled for regulatory purposes rather than as a fast response to the global spread of coronavirus. Regulations permit the companies to conduct reviews ahead of schedule when circumstances require.