Credit ratings: The ten most common misconceptions

COMMENT

Many column inches have been devoted to credit ratings agencies in recent years, but misconceptions about their role and methods remain. Yann le Pallec, EMEA head of Standard & Poor's Ratings Services, addresses 10 of the most common myths which still exist about credit ratings.

1. Credit ratings tell me if I have a good investment Ratings are an opinion about the capacity and willingness of a borrower to meet its financial obligations. They are not buy or sell recommendations, nor are they substitutes for independent investment analysis. While creditworthiness is often a key consideration for investors, there are a number of other considerations not addressed by ratings; for example, market price, liquidity and investment strategy. The performance of European securitised bonds early in the financial crisis illustrates this point - the market price of many ...