Economics Financial Markets Questions
Credit rating agencies play a crucial role in the financial market by assessing the creditworthiness of borrowers, such as governments, corporations, and financial institutions. They assign credit ratings to these entities based on their ability to repay their debts. These ratings provide investors with an independent evaluation of the credit risk associated with investing in a particular entity's debt securities. By providing this information, credit rating agencies help investors make informed decisions and allocate their capital efficiently. Additionally, credit ratings also influence the interest rates at which borrowers can borrow funds, as higher ratings generally result in lower borrowing costs. Overall, credit rating agencies contribute to the stability and transparency of financial markets by providing an objective assessment of credit risk.