"Romanian authorities are performing a real balancing act to prevent Romania's rating from falling into the 'junk' category, which would hinder the country's access to financing markets and lead to increased borrowing costs. If Romania borrows at higher costs, Romanian companies will do the same," Bichi stated. He noted that due to many technical aspects involved, the subject of credit ratings remains unclear for the general public and sometimes even for economic analysts.
The analysis explains that a rating agency is an independent legal entity whose activity includes granting professional credit ratings. These ratings involve prospective evaluation of credit risk for issuers or financial obligations. "The primary rationale for rating agencies' existence is to reduce information asymmetry between financial instrument issuers and investors regarding their capacity and willingness to make timely payments on their debts," Bichi explained.
The rating sector is highly concentrated, consisting of several major global players including Standard & Poor's, Moody's and Fitch Ratings, known as the 'Big Three', along with various minor regional or specialised agencies. According to European legal provisions, a credit rating represents an opinion based on a well-established classification system regarding the creditworthiness of an entity or financial obligation.
Sovereign credit ratings indicate both the capacity and willingness of governments to honour their financial obligations in full and on time to private commercial creditors. However, sovereign ratings do not cover obligations to other governments, supranational institutions like the IMF or World Bank, or public sector enterprises.
