Financial Risk - Monitoring Sovereign, Currency and Banking Sector Risk
Financial Risk - Monitoring Sovereign, Currency and Banking Sector Risk
Financial Risk - Monitoring Sovereign, Currency and Banking Sector Risk
EIU offers deep insight and analysis of the economic and political developments in the increasingly complex global environment;
identifying opportunities, trends, and risks on a global and national scale.
Formed in 1946, with more than 70 years of experience, it is ideally positioned to be a commentator, interpreter and forecaster
on the phenomenon of globalisation as it gathers pace, enabling businesses, financial firms, educational institutions and
governments to plan effectively for uncertain futures.
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For more information on our solutions and how they can help your organisation, please visit www.eiu.com.
MANAGING FINANCIAL RISK AMID GLOBAL UNCERTAINTY
PROTECT YOUR GLOBAL INVESTMENT PORTFOLIO
AAA
AA Hong Kong
A
BBB
BB
B
CCC Singapore
CC
C
D
N/A
Source: EIU Financial Risk.
FR’s transparent, granular rating methodology breaks these differences down into 59 individual
risk indicators, scored on a five-point scale and grouped into five categories: politics and institutions,
economic policy, economic structure, macroeconomic conditions, and finance and liquidity. With FR
also giving users access to supporting analysis and underlying data, as well as explanations of score
changes at the individual indicator level, analysts are given the tools to understand the nuances of
risk for any country and communicate them clearly to stakeholders. This is particularly useful when
comparing countries near the middle of the rating distribution, where differences in risk are less
clear cut. For example, analysing the underlying risk indicator scores shows that BBB-rated countries
differ from their higher-rated peers in two main respects: their more fragile political institutions, and
their greater vulnerability to a tightening in global funding conditions. The main difference between
BBB-rated countries and those rated BB or below is their relative economic robustness: countries
rated at BB or lower tend to have higher public debt levels, larger external imbalances and economic
concentration in a smaller number of sectors.
Currency risk AA BB CC
The risk of a sharp depreciation is A compromise with the EU has Currency stability is threatened
limited by strong fundamentals paved the way for the release of by the recent drought and a high
and a current-account surplus, bloc funds, which will support the level of political uncertainty as
which will persist in 2023-24, forint. However, the funds remain the next presidential election
even as global commodity prices frozen owing to a continued approaches. We assume that
moderate. A lower terminal rule-of-law dispute. That, tight exchange controls will
policy rate than that in the US will along with expected monetary enable the authorities to
apply some downward pressure loosening in late 2023, will see undertake an orderly currency
on the currency. a return of forint weakness. adjustment, but the risk of a
The possibility of tilt towards maxi-devaluation is high.
risk aversion on global financial
markets threatens to undermine
precarious support for the local
currency.
FR accommodates the differing importance of variables across developed and emerging markets,
as well as countries within the European Monetary Union, via three carefully calibrated versions of its
underlying model. For instance, the emerging-market model takes into account the inability of many
low- and middle-income countries to issue external debt in their home currencies—a limitation that is
seldom faced by developed markets. This allows Financial Risk users to compare sovereign, currency or
banking sector risk across all 131 rated countries directly.
Top ten safest territories for sovereign, currency and banking sector risk (August 2023)
Sovereign Currency Banking
Norway Sweden Switzerland
Sweden Norway Canada
Denmark Canada Sweden
Singapore Denmark Finland
Switzerland Switzerland Norway
Australia Australia Denmark
United States Japan Australia
Canada Finland Germany
Netherlands Germany Japan
Germany Netherlands Singapore
80
60
40
20
0
2007 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Source: EIU Financial Risk.
Identify sovereign, currency and banking sector risks posed by political and economic developments
across 131 markets with our Financial Risk service. Combining EIU’s market-leading data and country
expertise in a rigorous risk-modelling framework, it enables you to determine risk across countries.
Consistent methodology
Compare economic risk easily across countries, with a standardised format and forecasting
methodology.
Actionable intelligence
Download, manipulate, and analyse country risk assessment data in your own financial and risk-rating
models using our API for faster decision-making.
What’s included?
• Executive summary—all of the essential information covering the five main ratings categories
(sovereign, currency, banking, politics, and economic structure risk analysis).
• Financial risk analysis and outlook—explanations of the financial risk ratings, including any
positive or negative grade changes, as well as the ratings outlook for the next two calendar years.
• Our medium-term forecast—a two-year forecast of the political, economic, and external
payments situation.
• Data tables—forecasts and back series for a wide range of macroeconomic data relevant to
financial risk assessment, including the public finances, exchange rates, the banking sector, and the
external payments position.
• Regular event-driven economic analysis—updates are provided whenever events that affect our
financial forecasts occur.
Find out more information about our service features and how it could benefit your organisation by
visiting: eiu.com/financial-risk