Not sure this matters: any bankers want to confirm?

Britain’s credit rating could be slashed below Austria and Finland’s if it leaves the European Union, Standard & Poor’s has warned.
Moritz Kraemer, the agency’s chief sovereign rating officer, said Britain would be stripped of its top AAA rating with a one-notch downgrade if it voted to leave the bloc, and possibly double that if relations between Britain and Brussels soured.

Not sure it matters for a technical point. Because on sovereign ratings, don’t people take a two out of three approach? Moody’s, Fitch and S&P?

Not sure where I’ve got this from but that’s what’s rolling around the back of my head. That it’s what is the modal rating of the three that counts, not what any one of them says?

Moody’s and Fitch, the other main rating agencies, stripped the UK of its top rating in 2013.

So it makes no difference?

Any finance experts want to chip in?

8 thoughts on “Not sure this matters: any bankers want to confirm?”

  1. Credit rating agencies have a long history of complete incompetence. Warren Buffet pays no attention to them.

    Being downgraded by a credit rating agency is a sign of economic health, if anything.

  2. The credit rating agencies are always at least six months behind the market. Greece didn’t get a cut until its bond yields were a multiple of German ones. So if Brexit causes a decline in perceived bond safety, the market will kindly tell us long before the event.

  3. “Because on sovereign ratings, don’t people take a two out of three approach?”

    They are only binding for investors (usually ‘real money’, i.e. unleveraged investment vehicles such as pension funds, insurers, mutual funds…) whose investment mandate restricts what they can own based on ratings. The dividing line is normally investment grade vs. high yield. Even a two-notch downgrade would leave the UK well above high yield/’non-investment grade/speculative’.

    [In fairness, the ECB also pays attention to credit ratings (somewhat selectively, befitting it’s political nature), but it’s a special case because it’s not the central bank of a single state]

  4. This isn’t about credit ratings. This is about getting story into the papers to reinforce a certain narrative – don’t do X, it’s bad. A response along the lines of “two out of three ain’t bad” tends to support that narrative rather than undermine it.

  5. Makes perfect sense. It’s all about risk, and the unknown is higher risk than the known. Big deal.

    Whether any ratings agency cuts our rating in the event of leaving the EU tells us nothing about how good the idea is — as obviously they will. What will be more indicative is whether they put it up again a couple of years later. The former is reacting to risk of the unknown, the latter to reality.

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