How Sovereign Bond Ratings Can Be Paid For

Summary

The document explains how the issuer-pay model may apply to sovereign credit ratings. A rating agency can offer a rating to a government for a fee, while the government can decline. The agency may still publish a rating without payment, for example to make that sovereign comparable with other issuers. The response suggests that large countries such as the United Kingdom and the United States are rated without paying, and that a government's need for a rating can affect whether it chooses to pay.

This is a brief explanatory answer rather than a systematic survey of sovereign rating agency practices. It gives no cited evidence or details about agency-specific pricing, so the examples and broad claims should be treated as the respondent's account rather than a comprehensive rule. Its main takeaway is that sovereign ratings need not always be commissioned and paid for by the rated government.

Key ideas

• A sovereign government may choose whether to accept a paid rating offer.
• A rating agency may rate a government without charging it, including to support comparisons across issuers.
• The response says some large countries receive ratings at no charge.
• Whether a government pays may depend on its perceived need for a rating.

Tags

# Who pays for sovereign ratings?


# Who pays for sovereign ratings?












Does the "issuer-pay" model hold also for sovereign credit ratings? Do States pay for having their bond being rated?

## Answer by nbbo2 (score 2)

https://quant.stackexchange.com/a/26297

The "issuer-pay" model works like this: The Rating Agency goes to the issuer and says "We heard that you are going to issue bonds. We can give you a rating if you pay us XXX dollars. It will help you a lot to have our rating". The Issuer of course is free to refuse this offer (after all this is just a rating agency, not the Cosa Nostra). In this case the rating agency can still rate the issuer if it wants to (for a variety of reasons, for example to allow comparison with other issuers). I believe the big countries (United Kingdom, USA, etc.) fall in the latter case: they never pay for ratings, so they are rated gratis (at no charge). In general it will depend on the country's judgement of whether they need a rating or not.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.