Page 49 - Issue 72

V O L .1 E L I T E ISSUE 72

When Profit Intersects with Censorship: The problem of Credit
Rating Agencies' Neutrality

Farida Horania- Economics- Third year

In a world brimming with investment and a The basic idea behind these agencies is
desire to improve the economies of that clients pay for their ratings, which
countries around the world, investors opens the door to leniency in ratings.
increasingly need credit rating agencies. These agencies certainly want to

These companies evaluate the ability of maintain their commercial and
companies and countries to repay their profitable relationship with the countries
debts, guiding lenders. The higher a they rate. To maintain this relationship,
country's credit rating, the greater its ability the agencies must be lenient in their

to repay its debts, and the lower the interest ratings, which can have a negative
associated with the loan. Conversely, if its impact on the economy of these
credit rating declines, the risks to its ability countries and on investors. This actually
to repay its debts increase. The interest happened during the 2008 global crisis,

associated with the loan increases, and when the highest ratings were given to
countries increasingly resort to the securities mortgaged with high-risk real
International Monetary Fund for economic estate. Investors then relied on these
reform and rating increases. Some of the ratings as certainty, but in reality, they

largest credit rating agencies in the world are were misleading. The reason behind this
Moody's, Fitch, and Standard & Poor's. erroneous rating is that banks financed
However, the central problem here is that the these agencies to issue these ratings.
countries rated by these agencies are their

source of profit, and their goal, like any 49
other company, is certainly profit.