The Comparison of Sovereign Ratings and Country Risk Classification according to the Arrangement on Officially Supported Export Credits and its Development after Financial Crisis

In the first chapter the paper is focused on sovereign rating, it describes the history and explains the basic characteristics in the context of its usual usage. In the second chapter the basics behind the Arrangement on Officially Supported Export Credits are explained. Because the main purpose of this paper is to compare sovereign rating and the country risk classification based on the Arrangement, the chapter focuses especially on the Knaepen Package that introduced country risk classification to the Arrangement. In the chapter there is also the introduction to the Malzkuhn-Drysdale Package. In the third and fourth chapter sovereign ratings and county risk classifications are compared on theoretical basis. There were used several different criteria, e.g. methodology of rating/classifying, time necessary for adjustment and criteria for evaluation. The fifth chapter is focused on Basel I-III, the connection between Basel capital adequacy and both credit risk evaluation systems is explained. In the following chapter, the question of guilt of rating agencies and their role in the outbreak of financial crisis is discussed. The last chapter is based on the case study that describes the difference between development of financial crisis in Italy and Greece and its impact on rating grades and country risk classification