International Credit

Credit Ratings Firms Too Lenient With Sovereign Risk Ratings

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The National Palace in Santo Domingo, Dominican Republic. In 2005, the country defaulted on $1.6 billion in government bonds.

Credit ratings firms fail to see sovereign defaults coming soon enough and have typically been too late in issuing key downgrades of government or sovereign debt.  "Once a crisis is obvious, it's obvious to everybody."

The three major credit ratings firms -- Standard & Poors, Moody's and Fitch Ratings -- have a poor track record in predicting sovereign defaults soon enough to save creditors and investors, according to an analysis of 35 years of data conducted by the Wall Street Journal.

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