MOODY'S

The structure to Moody’s public sovereign credit rating methodology is similar to S&P’s, but different in some important aspects. It is similarly available online via registration but also available here:  However, like the rest of the Big Three, there is an early declaration that the methodology represents a general take, and there are varying subjective elements that will be applied for a given sovereign issuer. The structure of the methodology includes the overall structure of the rating consideration, the ‘scorecards’ which help the analysts, interestingly an illustration of how ESG is incorporated, and then finally each section gets a ‘why it matters’ narrative where Moody’s explains generally why certain metrics are important for their considerations. 

The general rating approach is somewhat of a tiered approach. For example, in relation to the illustration below that reveals the overarching structure, the first point-of-call is to use equal weightings to combine the final scores of the Economic Strength and Institutions and Governance Strength factors, which allows the analyst to arrive at the Economic Resiliency Score. The next stage for the analyst is to combine the Economic Resiliency score with the final score of the Fiscal Strength category, using dynamic weightings, which will provide the analyst with the overall Government Financial Strength score. To this score the results of the Susceptibility to Event Risk assessment is plugged into the Government Financial Strength score. What follows then is the addition of any other considerations, any instrument-related considerations, and the application of any relevant cross-sector methodologies which should, all put together, reveal a final proposed rating which the analyst will take to the convened rating committee. 

The ‘scorecard’ is a collection of proposed weightings for each category and relevant sub-categories. There are a variety of adjustments and equations that the analyst must inject into their scoring considerations for each section.