Protocolo Adicional al Acuerdo Marco de la Alianza del Pacífico

Until recently, the rating methodologies were a black box and did not specify the relevant details such as the assumptions of the appraisal (Bennell et al., 2006).73 For this reason many empirical studies attempted the question of what drives the sovereign ratings. The determinants of sovereign creditworthiness are more complex than ratings of non-sovereigns as they not only encompass the information about the ability of an issuer to repay its obligations but also their willingness to do so (Butler and Fauver, 2006). For instance, sovereigns can announce the defaulting state even if it has the funds to repay its liabilities in time. The indicators explaining sovereign ratings can be divided into two groups: economic fundamentals and socio-political factors (e.g. Cantor and Packer, 1996; Afonso et al., 2007; Alsakka and ap Gwilym, 2010b). In addition to economic and financial fundamentals, CRAs implement factors resembling legal and political risks as well as institutional setting (Moody’s, 2008; Fitch, 2011; S&P, 2011c). Hill et al. (2010) test for political factors and show that country risk rating and market risk premium help in explaining sovereign ratings.

There are different ways to capture the political risk in the empirical literature. Some studies account for it in the error term (Eliasson, 2002; Alsakka and ap Gwilym, 2010b), others apply proxy variables (Alexe et al., 2003; Mckenzie, 2004; Butler and Fauver, 2006; Mellios and Paget-Blanc, 2006; Erdem and Varli, 2014; Ozturk, 2014).

72. For instance, risk weights for claims based on sovereign ratings as follows: AAA-AA: 0%; A: 20%; BBB: 50%; BB-B: 100%; CCC-C: 150%; and D: deducted from capital (Von Schweinitz, 2007).

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Cantor and Packer (1996) in their cross section study of 49 sovereigns in 1995 find that sovereign ratings by S&P and Moody’s are determined by publicly accessible economic, social and political indicators. The most frequent variables quoted in the CRAs reports include: per capita income, GDP growth, inflation, fiscal balance, external balance, external debt and economic development as well as default history. Although a paper is considered a ground- breaking research on the determinants of ratings, it applies the OLS estimation and was criticised for its inability to capture the discrete nature of ratings (Bennell et al., 2006; Mellios and Paget-Blanc, 2006; Afonso et al., 2007).

Mulder and Perrelli (2001), studying 25 sovereigns during 1992-1999, find that the determinants of sovereign ratings are ratios including investment to GDP, debt to exports and the short-term debt to reserves. Similarly, Bissoondoyal-Bheenick (2005) investigates S&P and Moody’s to estimate the connection of sovereign ratings with economic indicators. Author applies ordered probit model to 95 sovereigns during 1995-1999. The results suggest that GNP per capita, inflation, current account balance and foreign reserves perform important function in explaining sovereign ratings in countries with lower ratings.

Using a rating sample of 70 sovereigns for the period 1989-1999, Bennell et al. (2006) suggest that significant explanatory variables include foreign debt to exports, fiscal deficit or surplus to GDP, mean of current deficit or surplus to GDP mean of inflation rate, mean in GDP growth, GDP per capita and development level. The shortcoming of the method is pooling ratings from 11 CRAs to form one dependent variable because it is believed the methodological aspects across CRAs differ significantly.

To address this issue, Afonso et al. (2007) estimate separate regressions for different CRAs. These authors use a random effects ordered probit model on a panel of 78 sovereigns over the 1995 to 2005 period. The fundamental indicators explaining sovereign ratings are GDP per capita, growth in GDP, government efficacy, government debt, external debt and external reserves and default predictions.

Bank ratings, on the other hand, measure the creditworthiness of intermediaries and by doing so they create the information through the cycle which is not otherwise available to the market (Hau et al., 2013). Due to the complexity (i.e. opacity) and systematic importance of the banking industry bank ratings are driven not only by their specific factors but also by macroeconomic environment and potential external support from the government (S&P, 2011d). Situation of banks is different to other corporations as the sovereigns may elect to assist

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banks even it if erodes their own creditworthiness (e.g. case of downgrade of Ireland by S&P in 2010 due to high sector fiscal costs) (S&P, 2011b). The governments evaluate the potential impact of the contingent liabilities of the financial sector on their ratings. When the systematic banking crisis strikes the government might be required to recapitalize the system. On the other hand, sovereigns might limit financial flexibility of intermediaries through regulatory means. Banks are prone to similar sources of stress as the sovereigns and for this reason the sovereign risk is considered as a key factor determining a bank rating (S&P, 1997; S&P, 1998; Fitch, 2002, Poon and Firth, 2005).

Poon and Firth (2005) study the determinants applied by Fitch to rate banks (see Fitch, 1998) on 82 countries and discover that size, profitability, asset quality and liquidity of the bank together with the sovereign credit risk contribute towards the bank ratings.

Van Roy (2013) extends the sample size by investigating ratings from S&P. The author follows Fitch (2004) for testing bank rating determinants and find that banking and finance score (estimated by the Heritage Foundation capturing aspects related to the market environment of banks), loan loss provisions to net interest revenues, net loans to total assets, liquid assets to deposits, equity to total assets, net interest margin, return on assets and total assets are the most influential.

Laere et al. (2012) conclude that following sovereign rating, bank size is the second most important indicator which has a positive impact on the ratings of intermediaries. Additionally, liquidity, profitability, asset quality and Z-index play an important role.

Hau et al. (2013) employ bank ratings by the big three CRAs over the period 1990 to 2011 and suggest that the potential determinants of bank ratings’ quality are CRA’s incentives, the regulatory system, reputational capital and competition pressures.

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