We know that with Basel all banks adopt a rating system to evaluate their loans and to calculate their regulatory capital. companies have always had problems with the rating calculated by banks and now with COVID-19 what will happen?
I don't think there will be any impact on the credit rating of banks. Although banks are giving some relief to customers but are getting a lot of business too.
Of course ratings will be impacted. Ratings are based on risks (credit, liquidity, etc) and with all of the macroeconomic indicators going down, risks will go up, hence ratings will go down. We should see higher YTMs soon. However I stopped trusting credit rating agencies since 2008 as they are continuously in the conflict of interest.... banks pay to be rated, and if you are not happy with the 'grade' you go somewhere else. The whole system is rotten. Stay well!!!
The credit rating will be impacted after the COVID-19 pandemic. However, the direction and the degree will be different according to the business. For an instance, the business of medical protection may be prosperous, and have a good margin and flowability. However for most companies, the business stopped and keep shrinking and facing a big risk in the future. Some even will bankrupt.
Dear Olga,
Though most stock markets are nosedived recently, the transitory effects will have prolonged impacts on economies and companies’ earnings because of coronavirus pandemic.
This is also evidenced by the fact that the Fed decreased very recently interest rates to zero levels and the markets keep nosediving. This is an indication that markets are already far sighting and factoring the long-term impacts of current world events because of coronavirus pandemic. I am afraid, but current world events will have major impacts on companies’ earnings, which will definitely led to many bankruptcies.
Prof. Dr. Mazin A. M. Al Janabi
Full Professor of Finance & Banking and Financial Engineering
EGADE Business School, Tecnologico de Monterrey,
Santa Fe Campus, Mexico City, Mexico.
Dear Olga
the company will experience a distortion with symptoms of inability to finance or fund operational activities which also results in an inability to manage the company's credit. for that we need an idea in the form of implementing operational costs reduced to save the company, that's just one option.
this temporary effect will have an impact on economic sustainability and company revenue will decline due to the corona virus pandemic19.
This is also proven by the fact that there is a decline in the value of each country's currency, inflation and the value of shares plummeted
Credit rating of banks will definitely be affected. The stay at home and social distancing adopted by nation's is impacting on a whole lot of things in the society. Particularly, the going concern of banks will be a thing we need to watch out for.
Rating agencies that issue recommendations as well as corporate and other credit ratings take into account various factors affecting the economic processes of enterprises and countries, and therefore probably also take into account the current pandemic of the Coronavirus SARS-CoV-2 when developing these recommendations and ratings. Is the stronger impact of the SARS-CoV-2 Coronavirus pandemic on the functioning of individual enterprises, sectors and branches of the economy and entire national economies, the more this factor is taken into account when developing specific recommendations and ratings describing the current and prospective socio-economic and financial situation of individual entities economic sectors, sectors of the economy and entire national economies. Recommendations and ratings are treated by a significant part of investors operating on financial markets of different countries as an important, additional source of information presenting economic development perspectives, level of creditworthiness, level of profitability of specific financial instruments and entities issuing them etc. Taking into account current economic data describing the impact of a pandemic SARS-CoV-2 coronavirus on individual economies and the global economy, it can be stated that the forecasted great economic downturn that will occur in the following months, quarters and perhaps also in some countries also in the following years is in the recommendations and ratings currently under development largely associated with the SARS-CoV-2 Coronavirus pandemic.
Greetings,
Dariusz Prokopowicz
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