This evening the Fitch rating agency decides if it maintains Romania in the category recommended for investments. What does each rating note mean and how to evaluate

In a few hours the Fitch rating agency will decide whether to maintain Romania among the countries recommended for investments or relegates it to “Junk”. The hope of the Romanian authorities is for the rating to be maintained, after the tax packages have been considered convincing. How to take Fitch the decision to grant the sovereign rating and what each of the notes has in “catalog” means

Whose rating agencies belong?

Moody's is a quoted and independent American society, owned by 13% by billionaire Warren Buffett. Fitch belongs mostly to the French society Fimalac, founded by Marc Lacarrière and 20% of the Hearst group. Standard & Poor's is owned by American editor McGraw-Hill Companies.

When Fitch attributes a country rating, the process is rigorous, confidential and involves a combination of data analysis and direct dialogue with national authorities.

How Fitch processes

Preparing and collecting data. Fitch analysts collect and analyze a wide range of data: macroeconomic indicators (GDP, inflation, unemployment), public debt, tax policies, external accounts, power of institutions, political evolutions and recent reforms. They monitor official reports, market trends, news sources and analyzes.

Direct meetings and discussions. Who comes: usually the main analyst responsible for the sovereign rating (sometimes with one or two colleagues) deals with the process. For major or complex ratings, a restricted team can be involved. The exact number is not disclosed, but it is usually limited to a few specialists.

Who is talking to: Analysts set meetings – generally once or twice a year, but more often in periods at high risk – with the main national decision -makers: the Ministry of Finance officials, the Central Bank, occasionally, other government agencies and economic experts, sometimes important participants in the financial markets

These meetings are extensive and cover the fiscal strategy, the prospect of the economy, the sustainability of the debt, the government reform plans, the political risks and the current challenges. The dialogue is open but confidential.

Analysis: After meetings, the main analyst elaborates a rating proposal, based on both statistical data and qualitative information resulting from discussions.

The rating is determined according to the criteria published by the fitch: macroeconomic performance, fiscal solidate, institutional efficiency, external finances, political risk and stability of the financial sector.

The Decision of the Internal Committee: The rating proposal is presented to the Sovereign Fitch rating committee, made up of experienced analysts and decision makers. The committee analyzes the proposal, asks questions, debates and votes. The decision is taken by equal vote, reflecting the expertise and the collective judgment.

For countries with high profile or important rating changes, the committee may have a larger number of members (sometimes up to 20), otherwise, it is usually a restricted team.

Rating publication: After a last check, Fitch communicates the Government's decision and publishes a detailed report, explaining the rating, perspective and reasoning.

See HERE Agency for Fitch Agency

What does every rating note mean

Investment Grade (recommended for investments) – AAA

The highest rating.
Indicates an exceptional ability to pay their debts. The risk of default is practically non -existent. It is granted very rarely and only to entities/countries with a stable economy, excellent liquidity and extremely solid perspectives.

AA+ / AA / AA- – Very sure.

Very powerful payment capacity, but slightly more vulnerable than AAA to unexpected changes in the economic or political environment.

A+ / A / A -STABIL, but moderately vulnerable.

Payment capacity is good. However, economic or adverse fluctuations can affect this category faster than AA.

BBB+ / BBB / BBB- – The last level of Investment Grade.

Medium quality, still recommended for investments. Sufficiently solid, but is sensitive to negative economic events or political dangers. If the rating drops below BBB-, the category becomes “speculative”.

Speculative degrees (“junk” or not recommended to investments)

BB+ / bb / bb– speculative, vulnerable.
An entity with this rating may face significant difficulties in periods of economic stress. The risk of default is considerably higher than in investment degrees.

B+ / b / b- -the major default.

Entities are experiencing serious financial uncertainties. The situation may deteriorate quickly if internal or external economic problems occur.

CCC+ / CCC / CCC- -The extremely defaults.

Payment capacity depends on favorable market conditions. Any economic shock can lead directly to the inability to pay. Basically, the default is probably.

CC – close to inability to pay.

It is very likely that the issuer will not be able to pay his debts. The problems are deep and imminent.

C -father imminent or already produced.

Basically there is no payment capacity, or the default has already begun. All investors consider the debt non -recoverable.

RD (Restricted default) -Default partially.

The issuer did not pay one or more categories of debt, but continues to honor other obligations. It is considered an intermediate stage to the total default.

D -Total Default.

The issuer does not pay any of his obligations. All debts are non -recoverable. It is the worst rating possible.

Plus (+) and minus ( -): show the degree of differentiation between the ratings in the same letter. Example: AA+ will be better than AA and better than AA-. The source of information