June 30, 2011

Criteria | Governments | Sovereigns:

Sovereign Government Rating
Methodology And Assumptions
Primary Credit Analyst:
Alexandra Dimitrijevic, Paris (33) 1-4420-6663; alexandra_dimitrijevic@standardandpoors.com
Secondary Credit Analysts:
David T Beers, London (44) 20-7176-7101; david_beers@standardandpoors.com
John Chambers, CFA, New York (1) 212-438-7344; john_chambers@standardandpoors.com
Moritz Kraemer, Frankfurt (49) 69-33-99-9249; moritz_kraemer@standardandpoors.com
Criteria Officers:
Alexandra Dimitrijevic, Paris (33) 1-4420-6663; alexandra_dimitrijevic@standardandpoors.com
Colleen Woodell, New York (1) 212-438-2118; colleen_woodell@standardandpoors.com

Table Of Contents
I. SCOPE
II. SUMMARY
III. CHANGES FROM RFC
IV. EFFECT ON OUTSTANDING RATINGS
V. EFFECTIVE DATE AND TRANSITION
VI. METHODOLOGY
A. Standard & Poor's Sovereign Rating Calibrations
B. Determining A Sovereign Foreign-currency Rating
C. Assessing The Five Main Sovereign Rating Factors
1. Political Score
2. Economic Score
3. External Score

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Table Of Contents (cont.)
4. Fiscal Score
5. Monetary Score
D. Determining A Sovereign Local-Currency RatingVII. APPENDICES
Appendix A. Glossary Of Key Indicators And Data Sources
Appendix B. Application Of Standard & Poor's Ratings Definitions To
Sovereigns Emerging From Default
Appendix C. Example Of Application Of The Methodology For A
Sovereign Receiving Official Funding
RELATED CRITERIA AND RESEARCH

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Criteria | Governments | Sovereigns:

Sovereign Government Rating Methodology
And Assumptions
1. This sovereign criteria update follows the publication of "Request for Comment: Sovereign Government Rating
Methodology and Assumptions," on Nov. 26, 2010. This update provides additional clarity by introducing a finercalibration of the five major rating factors that form the foundation of a sovereign analysis and by articulating how
these factors combine to derive a sovereign's issuer credit ratings. It also aims to incorporate the information derived
from the 2008-2009 global recession, particularly regarding the potential effect of financial sector difficulties on
governments' fiscal profiles. Specific considerations on the credit analysis of sovereigns in monetary unions are also
covered. (See the related CreditMatters TV segment, "S&P's Updated Sovereign Ratings Methodology Aims To
Provide A Clear Reflection Of The Fiscal Climate," dated June 30, 2011.)
2. The "Principles Of Credit Ratings," published Feb. 16, 2011, form the basis of these criteria. This article replacesStandard & Poor's methodology addressed in "Sovereign Credit Ratings: A Primer," published May 29, 2008.

I. SCOPE
3. This methodology applies to ratings on all sovereign governments (also known as central governments).
4. All references to sovereign ratings in this article pertain to a sovereign's ability and willingness to service financial
obligations to nonofficial, in other words commercial, creditors. A sovereign's issuer credit rating does not reflect its
ability and willingness to service other types of obligations listed below.
• Obligations to other governments (such as Paris Club debt) or intergovernmental debt.
• Obligations to supranationals, such as the International Monetary Fund (IMF) or the World Bank.
• Obligations to honor a guarantee that does not meet our criteria for sovereign guaranteed debt (see "Rating
Sovereign-Guaranteed Debt," published April 6, 2009).
• Obligations issued by public sector enterprises, government-related entities or local and regional governments.
However, the methodology takes into account the potential effect that these obligations may have on a sovereign's
ability to service its commercial financial obligations.
5. Moreover, this article does not address post-default recovery prospects and their effect on specific issue ratings. A
separate criteria article "Introduction Of Sovereign Recovery Ratings," published June 14, 2007, covers these topics.
6. In this article, "rating" refers to an issuer credit rating, if not otherwise qualified.

II. SUMMARY
7. The sovereign rating methodology ("criteria" and "methodology" are used interchangeably herein) addresses thefactors that affect a sovereign government's willingness and ability to service its debt on time and in full. The
analysis focuses on a sovereign's performance over past economic and political cycles, as well as factors that indicate
greater or lesser fiscal and monetary flexibility over the course of future economic cycles.

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptions

8. The five key factors that form the foundation of our sovereign credit analysis are:• Institutional effectiveness and political risks, reflected in the political score.
• Economic structure and growth prospects, reflected in the economic score.
• External liquidity and international investment position, reflected in the external score.
• Fiscal performance and flexibility, as well as debt burden, reflected in the fiscal score.
• Monetary flexibility, reflected in the monetary score.
9. Our sovereign rating analysis involves several steps, which the chart below summarizes.

10. The first step is to assign a score to each of the five key factors on a six-point numerical scale from '1' (the strongest)
to '6' (the weakest). Each score is based on a series of quantitative factors and qualitative considerations described insubpart VI.C below. The criteria then combine the political and economic scores to form a sovereign's "political andeconomic profile," and the external, fiscal, and monetary scores to form its "flexibility and performance profile."Those two profiles combine to determine the sovereign foreign-currency rating, after factoring in exceptional
adjustments when applicable (see subpart VI.B).
11. A sovereign local-currency rating is determined by applying zero to two notches of uplift from the foreign-currency
rating following our methodology outlined in subpart VI.D. Sovereign local-currency ratings can be higher thanStandard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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sovereign foreign-currency ratings because local-currency creditworthiness may be supported by the unique powersthat sovereigns possess within their own borders, including issuance of the local currency and regulatory control ofthe domestic financial system. When a sovereign is a member of a monetary union, and thus cedes monetary andexchange-rate policy to a common central bank, or when it uses the currency of another sovereign, thelocal-currency rating is equal to the foreign-currency rating.

III. CHANGES FROM RFC
12. On Nov. 26, 2010, Standard & Poor's published "Request for Comment: Sovereign Government Rating
Methodology and Assumptions." Market participants who responded were generally positive about the increasedtransparency and clarity of the criteria. Some of them provided comments about parts of the text that could befurther clarified or specified, or possible different weighting of certain factors. Those comments led to the following
main changes between these criteria and the proposal presented in the request for comment:• The political score puts more emphasis on factors such as risks of political instability, the effect of social andeconomic factors and the potential effect of international organizations on national policy setting.
• The economic, external and fiscal scores are further clarified by changes in presentation and a better specificationof the adjustment factors.
• The assessment of contingent liabilities related to the financial sector provides a more comprehensive measure ofcredit risks, market risks, and operational risks by using the "Bank Capital Methodology And Assumptions"published on Dec. 6, 2010.
• The effect of financing from another government, the IMF, or a multilateral lender such as the World Bank or asimilar institution (also called 'official funding' in the rest of this article) on the rating of the recipient of suchprograms is further developed.
• The monetary score puts less emphasis on the exchange rate regime and provides more details to assess thedevelopment of the financial system and the capital market.
• Factors leading to an uplift of the local-currency rating from the foreign-currency rating put more emphasis on
monetary flexibility.

IV. EFFECT ON OUTSTANDING RATINGS
13. We expect few changes to existing foreign-currency sovereign ratings from the updated criteria. On the other hand,
we expect the revised criteria to lead to more numerous changes to local-currency ratings. Where gaps between
foreign- and local-currency sovereign ratings exist, the rating differential should narrow in about half of the cases,
most often with the sovereign local-currency ratings being lowered by one or two notches. The lowering of somesovereign local-currency ratings could affect our ratings on other issuers, such as government-related entities(GREs).

V. EFFECTIVE DATE AND TRANSITION
14. The criteria described in this article are effective immediately. We intend to complete our review of all issuers
affected with the next six months.

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VI. METHODOLOGY
A. Standard & Poor's Sovereign Rating Calibrations
15. The overall calibration of the sovereign ratings criteria is based on our analysis of the history of sovereign defaults,
the effect of the 2008-2009 financial and economic crisis on sovereign creditworthiness, and what we view to be thecredit strength of sovereign governments compared with other types of issuers.

History of sovereign defaults
16. The review of the history of sovereign defaults uses the following main sources:• Standard & Poor's "Sovereign Defaults at 26-Year Low, To Show Little Change in 2007," published Sept. 18,
2006, which looks at the default history of rated and unrated sovereigns since 1824.
• "Sovereign Defaults And Rating Transition Data: 2010 Update," published Feb. 23, 2011, which covers theperformance of Standard & Poor's sovereign ratings, both in terms of transition and default, over the period
1975 to 2010.
• The data that Carmen Reinhart and Kenneth Rogoff gathered in their book "This Time Is Different," coveringover 250 sovereign external default episodes over the period 1800-2009 and at least 68 cases of default on
domestic debt. However, the book's definition of default is broader than our own.
17. The sources above show that, since the beginning of the 19th century, most sovereign defaults have occurredbecause a defaulting government's past policies left it ill prepared to face an unexpected turn of events (in otherwords, a shock). War, regime change, other forms of political instability and sharp deterioration in terms of tradeare examples of shocks. Some defaults also followed governments' decision to abandon the gold standard, underwhich they backed their paper currencies with gold at fixed conversion rates. Following a shock, when agovernment's previous fiscal or monetary policies left it little room for maneuver, or when economic policy did notsupport sustained economic growth then investors' perceptions tended to change quickly. This, in turn, raised
financing costs and, in some cases, left a government with default as the preferred policy response.

Effect of the 2008-2009 global recession
18. The recent global recession has not triggered a wave of sovereign defaults, though this chapter in economic history is
not over yet. However, the number of downgrades of sovereigns rated by Standard & Poor's, especially those inEurope, rose sharply in the past couple of years. The 2008-2009 global recession was the first synchronizedrecession since the establishment of the European Monetary Union (EMU). Our scoring calibration reflects theimportance of a sovereign's external and fiscal performance inside a monetary union relative to the rest of the zone.
Those sovereigns more reliant on funding sourced outside their national boundaries, and those that haveexperienced unexpected deterioration in their borrowing requirements or their growth prospects, have witnessed a
sharp rise in their funding costs relative to those of other EMU members.

Credit strength of sovereigns relative to other types of issuers
19. Central governments have unique powers, such as the ability to raise taxes, set laws, and control the supply ofmoney, which generally make them more creditworthy than other issuers with less authority. Consequently,
although Standard & Poor's sovereign ratings span the entire rating scale, there is a greater proportion of sovereign
ratings at the higher end of the scale compared with Standard & Poor's ratings in other sectors. Almost 15% of oursovereign foreign-currency ratings stood at the 'AAA' level at year-end 2010 and 11% in the 'AA' category,Standard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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compared with about 1% and 8%, respectively, for corporate issuers. As of the date of this article, Standard &Poor's rates 126 sovereign governments. The global sovereign universe is over 200 governments when taking into
account the 192 member states of the U.N. and other states and territories outside the U.N. If Standard & Poor's
rated all sovereign governments, we believe that the proportion of ratings in the lower categories would likely rise.
20. Standard & Poor's elaborates and calibrates its sovereign rating criteria based on the above observations and on its
general framework for the idealized behavior of its credit ratings over time through economic cycles. Three articles
outline our framework:• "Understanding Standard & Poor's Rating Definitions," published June 3, 2009;• "Credit Stability Criteria," published May 3, 2010; and• "The Time Dimension Of Standard & Poor's Credit Ratings," published Sept. 22, 2010.
21. We believe that the calibration of sovereign ratings in table 2 in subpart VI.B below achieves increased
comparability with other Standard & Poor's ratings across different sectors.

B. Determining A Sovereign Foreign-currency Rating
22. Standard & Poor's analysis of a sovereign's creditworthiness starts with its assessment and scoring of five key rating
factors (see table 1).

23. Each factor receives a score, using a six-point numerical scale from '1' (the strongest) to '6' (the weakest). A series ofquantitative factors and qualitative considerations, described in subpart VI.C below, form the basis for assigning thescores. The criteria then combine those five scores to form a sovereign's "political and economic profile," and its"flexibility and performance profile" as described below.
• The political and economic profile. The political and economic profile reflects our view of the resilience of acountry's economy, the strength and stability of the government's institutions, and the effectiveness of its
policy-making. It is the average of the political score (see section VI.C.1) and the economic score (see section
VI.C.2).
• The flexibility and performance profile. The flexibility and performance profile reflects our view of thesustainability of a government's fiscal balance and debt burden, in light of the country's external position, as wellas the government's fiscal and monetary flexibility. It is the average of the external score (see section VI.C.3), thewww.standardandpoors.com/ratingsdirect

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fiscal score (see section VI.C.4), and the monetary score (see section VI.C.5).
24. Those two profiles are then used in table 2 below to determine an indicative rating level.

25. We expect that our sovereign foreign-currency rating would in most cases fall within one notch of the indicative
rating level, based on the sovereign's positioning relative to peers. For example, for a sovereign we view as having a"moderately strong" political and economic profile and a "very strong" flexibility and performance profile, wewould most likely assign a rating within one notch of 'AA-'.
26. A sovereign foreign-currency rating might differ by more than one notch compared with the indicative rating level if
it meets one or more of the exceptional characteristics listed below in paragraphs 27 to 33. If a sovereign combinesseveral of the exceptional factors, its foreign-currency rating would be adjusted by the cumulative effect of thoseadjustments. Those exceptional adjustments are based on a forward-looking analysis. They are important because
certain components of credit risk can at times dominate overall creditworthiness even if the other factors remain
stable.
27. Extremely weak external liquidity. A sovereign receives a foreign-currency rating below the indicative rating level
when the country's external liquidity is at, or we expect it to deteriorate to, levels that are substantially worse thanthe benchmark for the weakest levels of external liquidity, as defined in table 5. For instance, the rating would beStandard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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one notch lower if the external score is '6' and we expect the ratio of gross external financing needs as a percentage
of current account receipts and usable foreign exchange reserves to reach more than about 1.5x the levelcommensurate with the benchmark for the weakest external liquidity in table 5. The rating would be two notches
lower if we expect them to reach more than twice that level.
28. Extremely weak fiscal situation. Similarly, a sovereign receives a foreign-currency rating below the indicative ratinglevel when its fiscal performance or its debt burden presents characteristics that are significantly worse than thebenchmark for the weakest levels as defined in tables 6 and 7. For instance, the rating would be one notch lower if
the debt score is '6' based on the sovereign's debt level as defined in table 7 and contingent liabilities are 'moderate'in accordance with table 8. The rating would be three notches lower if the debt score is '6', but the sovereign's debt
burden is 1.5 times the level commensurate with a '6' score in table 7, and, in addition, contingent liabilities are'very high' in accordance with table 8.
29. Exceptionally large net general government asset position. A sovereign receives a foreign-currency rating one notch
above the indicative rating level when it has exceptionally large liquid assets compared to peers at the same ratinglevel (typically accounting for more than 100% of GDP), providing the government with an exceptional buffer
during periods of economic or financial shocks.
30. Very high political risk and high debt burden. A sovereign with a political score of '6' cannot be rated higher than'BB+,' or 'B+' if the political score of '6' is combined with a debt score of '5' or '6' (see table 7), regardless of any
potential upward adjustment for a large net asset position (see paragraph 29). The track record of sovereign defaultssuggests that governance and political risks are among the main drivers of the poor economic policies that lead todefault, which is why the political score receives this particular weight.
31. Rescheduling risk. When a government is likely to engage in a debt rescheduling that qualifies as a distressedexchange, the sovereign's rating would be determined in accordance with the criteria "Rating Implications Of
Exchange Offers And Similar Restructurings," published May, 12 2009.
32. High security risk. In cases of imminent or rapidly rising risk of war, a sovereign rating could differ from theindicative rating level, depending on the conflict's expected magnitude and effect on the sovereign's credit
characteristics. History provides several examples of defaults, such as the former Yugoslavia, linked to a sovereign
government ceasing to exist following a war. In the other cases when the risk of conflict is long-standing but not
imminent, such as in the Gulf states, it affects the sovereign rating through an adjustment to the political score (seesubsection VI.C.1.d)).
33. Severe natural catastrophes. The occurrence of a rare, but highly severe, natural catastrophe could lead to amaterial deviation from the indicative rating level depending on the extent of damage and the effect on the country's
fundamentals. An example is the financial costs for Grenada, linked to damage from Hurricane Ivan (we estimate
these costs at close to 200% of the country's 2004 GDP), which, in our view, acted as the main trigger event for
Grenada's ensuing default from its pre-hurricane rating level of 'BB-.' However, more generally, when a country isconstantly exposed to natural disasters or adverse weather conditions, such as in the Caribbean region, thisvulnerability affects our analysis of its economic structure, the potential volatility of its economic output, and thegovernment's readiness to respond to those events. For more information, see "Assessing The Impact Of Natural
Disasters On Sovereign Credit Ratings," published June 14, 2010.
34. A sovereign that becomes unable to attract credit at a sustainable interest rate may receive lower-cost financing fromanother sovereign, the IMF, the World Bank or similar institutions, also called official funding. Participation in thistype of program addresses part of the recipient's funding needs for a defined period of time and often entails
conditions for continued access, such as the implementation of economic reforms or domestic fiscal consolidation.
Where the program may facilitate reforms and the official funding is likely to remain in place to cover the recipient's

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptions

borrowing requirements, it could break the downward trend in the recipient's credit quality. In other cases,
participation in these programs may not prove successful and thus may not positively affect the recipient's
creditworthiness. The effect of this official funding on the recipient's rating is reflected in three of the five key rating
factors: the political score (see subsection VI.C.1.e)), the external score (see subsection VI.C.3.e)) and the fiscal score(see paragraph 96 and table 7), and not as an exceptional adjustment factor. Appendix C illustrates the applicationof this approach by an example.

C. Assessing The Five Main Sovereign Rating Factors
35. The analysis of each of the key five factors embodies a combination of quantitative and qualitative elements. Somefactors, such as the robustness of political institutions, are primarily qualitative, while others, such as the economy,
debt, and external liquidity use mostly quantitative indicators.

1. Political Score
36. The political score assesses how a government's institutions and policymaking affect a sovereign's credit
fundamentals by delivering sustainable public finances, promoting balanced economic growth, and responding toeconomic or political shocks.
37. The political score captures the factors listed below, which are uncorrelated with any particular political system:• The effectiveness, stability, and predictability of the sovereign's policymaking and political institutions (primaryfactor).
• The transparency and accountability of institutions, data, and processes, as well as the coverage and reliability ofstatistical information (secondary factor).
• The government's payment culture (potential adjustment factor).
• External security risks (potential adjustment factor).
• The potential effect of external organizations on policy setting (potential adjustment factor).
38. Table 3 shows the interplay of the factors listed in paragraph 37. The primary factor for determining the politicalscore is the effectiveness, stability, and predictability of the sovereign's policymaking and political institutions. The
secondary factor provides additional information on the transparency and accountability and acts as a qualifier tothe primary factor in determining the initial political score (see table 3). The table contains the characteristics
generally expected at different levels for the political score, although a government might exhibit a majority but not
all of them. Finally, a sovereign's political score may be better or worse than the initial score based on the last threefactors, payment culture, security risks, and effect of external organizations, as explained in table 3.

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39. The assessment of these factors relies mostly on our qualitative analysis, which may be complemented by externalsources such as:• The World Bank's "Doing Business" reports.
• The World Bank's "Worldwide Governance Indicators," which measure six broad dimensions of governanceStandard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptions(voice and accountability, governance effectiveness, rule of law, regulatory quality, control of corruption, andpolitical stability and absence of violence).
• The United Nations Development Programme's "Human Development Indicators", with a particular focus on the"human development index."• Transparency International's "Corruption Perception Index."• IMF and World Bank Reports on the Observance of Standards and Codes.

a) Effectiveness, stability, and predictability of policymaking and political institutions
40. The criteria analyze the effectiveness, stability, and predictability of policymaking and institutions based on:• The track record of a sovereign in managing past political, economic, and financial crises; maintaining prudent
policy-making in good times; and delivering balanced economic growth.
• A sovereign's ability and willingness to implement reforms to address fiscal challenges, such as health care orpensions, to ensure sustainable public finances over the long term.
• The predictability in the overall policy framework and developments that may affect policy responses to future
crisis or lead to significant policy shifts.
• Actual or potential challenges to political institutions, possibly involving domestic conflict, from populardemands for increased political or economic participation, or from significant challenges to the legitimacy of
institutions on ethnic, religious, or political grounds.
41. Effective policymaking and stable political institutions enable governments to address proactively periods of
economic distress and to take measures to correct imbalances. This helps to sustain long-term growth prospects andlimits the risk of sharp deterioration of a sovereign's creditworthiness. Stable and well-established institutions
generally ensure a certain degree of predictability in the general direction of policymaking, even when politicalpower shifts between competing parties and policy details change as a result. Conversely, succession risks, highconcentration of power, and potential or actual challenges to political institutions are factors that can pose risks toinstitutional stability, and in turn lead to substantial policy shifts and affect the continuity of key credit
characteristics. The analysis of the risk from challenges to political institutions is based on the history of internal
political conflicts, including extra-constitutional changes of government.

b) Transparency and accountability of institutions, data, and processes
42. The accountability and transparency of institutions, data, and processes are based on the analysis of the following:• The existence of checks and balances between institutions.
• The perceived level of corruption in the country, which correlates strongly to the accountability of theinstitutions.
• The unbiased enforcement of contracts and respect for the rule of law (especially in the area of property rights),
which correlates closely to respect for creditors' and investors' interests.
• The independence of statistical offices and the media, as well as the history of data revisions or data gaps, asmeasures of the transparency and reliability of the information.
43. The last point includes an assessment of the quality and consistency of the relevant data, which include national
income accounts, fiscal accounts, monetary surveys, public enterprise accounts, the balance of payments, and theinternational investment position. These data are based on estimated values and are not always measured with
precision. Thus, where there is a history of significant data revisions, poor forecasting, or data gaps andinconsistencies (either from one source or between sources), the criteria call for interpreting the data in light of thesewww.standardandpoors.com/ratingsdirect

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discrepancies as reflected in table 3.
44. The transparency and accountability of institutions bear directly on sovereign creditworthiness because they
reinforce the stability and predictability both of political institutions and the political framework. They do this eventhough they may not reinforce the stability of a ruling political class or party. In addition, transparent andaccountable institutions, processes, and data are important because they enhance the reliability and accuracy of
information, and help make known in a timely manner any significant shifts in a country's policymaking or theoccurrence of risks relevant to sovereign credit risk.

c) A government's debt payment culture
45. The first potential adjustment to the initial political score relates to debt payment culture. Willingness to default is
an important consideration when analyzing a sovereign's creditworthiness, partly because creditors have only
limited legal redress. As a result, a sovereign can, and sometimes does, default on its obligations even when it
possesses the financial capability for timely debt service. Therefore, the analysis aims to assess to what degree
policymakers likely are willing to prioritize debt service to avoid default in difficult situations.
46. The overall political score cannot be better than '6' in cases where we believe that a government's debt payment
culture represents a credit risk. For this to happen, a government would typically present one or more of thefollowing characteristics:• Arrears on bilateral official debt, which is debt owed to other governments and government-owned entities.
• A public discourse that questions the legitimacy of debt contracted by a previous administration (so-called"odious debt").
• No material policy change since the last default on commercial debt.
47. Academic studies suggest the relevance of the last characteristic mentioned just above. In their 2003 article "Debt
Intolerance," Reinhart, Rogoff, and Savastano find that countries can graduate from being serial defaulters,
although the path to "graduation" is long. Defaults weaken political institutions because the ensuing economic
decline discredits the policies that led to default and raises the population's mistrust. This greater public mistrust
may make forming a consensus on economic policy more difficult and thus may prompt further defaults in the
future. The evidence that the study presents also suggests that the first default may be much more costly than laterones, hence the idea that, with each successive default, serial defaulters have less of a reputation to lose.

d) External security risks
48. The second potential adjustment to the initial political score relates to geopolitical and external security risks,
including war or threats of war stemming from conflicts or strained relations with neighboring countries. When
there is a long-standing risk of war within the country's territory, but we do not foresee that this risk will likely
materialize in the next three to five years, the political score would be one to two categories worse than the initialscore. However, when these risks are imminent or rapidly rising, it would affect the sovereign's political risk and theoverall rating to a greater extent, depending on what the magnitude and effect of the conflict would be on thesovereign's economic and political situation (see exceptional adjustment factors in paragraph 32). National security
is a rating concern because military threats may place a large burden on fiscal policy, reduce the flow of potential
investment, or put the balance of payments under stress. It may also lead to economic sanctions.

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptionse) Effect of external organizations on policy making
49. At times, membership in supranational organizations can affect policy setting. Membership in military alliances,
political unions, monetary unions, and trading blocks, for example, brings with it not only benefits but obligations
as well. This issue is most evident when a sovereign seeks exceptional official funding, for example from the IMF or
the European Union. Such funding often provides much needed financing, either for balance of payment support (seesubsection VI.C.3.e) or for budgetary support (see paragraph 96) for short- to medium-term tenors, but it alsoentails conditions for that support to be disbursed over time.
50. When participation in a supranational program--either in the guise of conditions for membership or conditions for
exceptional financial assistance--gives greater predictability and effectiveness of policymaking, then a sovereign's
political score would be one category better. Conversely, if a sovereign's commitment to external organizations is
not credible with investors or its domestic population such that policy outcomes or access to funding is more
uncertain, then a sovereign's political score would be one category worse.

2. Economic Score
51. The history of sovereign defaults suggests that a wealthy, diversified, resilient, market-oriented, and adaptableeconomic structure, coupled with a track record of sustained economic growth, provides a sovereign government
with a strong revenue base, enhances its fiscal and monetary policy flexibility, and ultimately boosts its debt-bearing
capacity. We observe that market-oriented economies tend to produce higher wealth levels because these economies
enable more efficient allocation of resources to promote sustainable, long-term economic growth.
52. The following three factors are the key drivers of a sovereign's economic score:• Income levels.
• Growth prospects.
• Economic diversity and volatility.
53. The combination of those three factors determines a sovereign economic score as presented in table 4. The criteria
derive an initial score based on a country's income level, as measured by its GDP per capita (see subsection
VI.C.2.a). Then the initial score receives a positive or negative adjustment by up to two categories, based on theeconomy's growth prospects (see subsection VI.C.2.b), as well as its potential concentration or volatility (seesubsection VI.C.2.c).

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptionsa) Income levels
54. GDP per capita is Standard & Poor's most prominent measure of income levels. With higher GDP per capita, acountry has a broader potential tax and funding base upon which to draw, a factor that generally supports
creditworthiness. The determination of the economic score uses the latest GDP per capita from national statistics,
converted to U.S. dollars. In cases where a country's GDP per capita fluctuates around the border between two scorecategories (see table 4), then the score is based on a moving three–year average of GDP per capita.
55. A sovereign's economic score would be one category better or worse than the initial score, if the GDP per capita inStandard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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U.S. dollars was not an adequate reflection of a country's income level due to, respectively, a significant currency
under- or over-valuation. A currency might be significantly undervalued, for instance, when a country with a
non-market determined exchange rate runs sustained current account surpluses and holds sizeable usable reserves(covering consistently more than 12 months current account payments). Conversely, a currency might besignificantly overvalued, for instance, when a country with capital controls runs consistent current account deficits.

b) Economic growth prospects
56. A sovereign's economic score is one category worse or better than the initial score when its growth prospects arewell above or below those of peers in the same GDP per capita category. The key measure of economic growth isreal per capita GDP trend growth.
57. The term "trend growth" refers to estimates of the rate at which GDP grows sustainably over an extended period, inother words without creating inflationary pressure, asset bubbles, or other economic dislocations. Such estimates are
generally derived from empirical observations based on the recent past and longer-term historical trends, and theyattempt to look through the fluctuations of an economic cycle, smoothing for peaks and troughs in output during
the period being analyzed. Our analysis focuses on per capita GDP growth in order to normalize for growth driven
more by changes in population than productivity.
58. In order to form the trend growth measure used in table 4, the criteria use the average growth in a country's real per
capita GDP over a 10-year period, which generally covers at least one economic cycle (including both a period of
economic expansion and a period of contraction). More specifically, the real per capita GDP trend growth is theaverage of six years historical data, our current year estimate and three-year forecasts. The latest historical year,
current year estimate, and forecasts are weighted 100%, while previous years are assigned a lower weight in order toavoid a cliff effect when an exceptional year drops out of the 10-year average. The source for historical data isnational statistics. Our estimate and forecasts result from analysis of the government forecasts, projections from the
IMF and other sources, as well as identification of the main factors that could lead to a change in future growthcompared to the historical trend. The trend growth calculation is adjusted for one-off items such as changes in thestatistical base or a one-off sizable investment.
59. In order to derive the median growth rate in real per capita GDP for a group of peer countries used in table 4, thecriteria use Standard & Poor's and IMF data for almost all rated and unrated countries. We derive one median
growth rate for countries with an initial economic score of '1' or '2' (GDP per capita above US$ 25,000), one forcountries with an initial economic score of '3' or '4' (GDP per capita between US$ 5,000 and 25,000), and one forcountries with an initial economic score of '5' or '6' (GDP per capita below US$ 5,000). We have observed thatcountries in those combined categories have relatively comparable growth levels and that statistics for narrower peer
categories are less meaningful.
60. A sovereign's economic score would be one category worse than the initial score, when GDP growth seems to befueled mostly by a rapid increase in banking sector domestic claims on the private sector, combined with a sustained
growth in inflation-adjusted asset prices, indicating vulnerability to a potential credit-fueled asset bubble. We
measure this factor along the lines of the BICRA methodology (see "Request for Comment: Methodology For
Determining Banking Industry Country Risk Assessments," published May 13, 2010).

c) Economic diversity and volatility
61. Finally, a sovereign exposed to significant economic concentration and volatility compared with its peers receives an
economic score that is one category worse than the initial score. More precisely, a sovereign's economic score wouldwww.standardandpoors.com/ratingsdirect

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be one category worse if it carried significant exposure to a single cyclical industry (typically accounting for morethan about 20% of GDP), or if its economic activity were vulnerable due to constant exposure to natural disasters
or adverse weather conditions. However, the score would not receive an adjustment if the country had an initial
economic score of '5' or '6' or if it displayed very large net general government liquid assets (typically above 50% ofGDP) that can be used to mitigate the effect of this volatility. Economic concentration and volatility are importantbecause a narrowly based economic structure tends to be correlated with greater variation in growth than is typicalof a more diversified economy. Pronounced economic cycles tend to test economic policy flexibility more harshly
and impair the government's balance sheet more significantly than shallow economic cycles.

3. External Score
62. The external score reflects a country's ability to generate receipts from abroad necessary to meet its public- andprivate-sector obligations to nonresidents. It refers to the transactions and positions of all residents (public- andprivate-sector entities) versus those of nonresidents because it is the totality of these transactions that affects theexchange rates of a country's currency.
63. Three factors drive a country's external score:• The status of a sovereign's currency in international transactions.
• The country's external liquidity, which provides an indication of the economy's ability to generate the foreignexchange necessary to meet its public- and private-sector obligations to nonresidents.
• The country's external indebtedness, which shows residents' assets and liabilities (in both foreign and local
currency) relative to the rest of the world.

a) Currency status in international transactions
64. The first step in the assessment of the external score relates to the degree to which a sovereign's currency is used ininternational transactions. The criteria assign a better external liquidity score to sovereigns that control a "reserve
currency" or an "actively traded currency." These sovereigns have a common attribute: Their currencies are used(widely for reserve currencies) in financial transactions outside their own borders, which means that they may be lessvulnerable to shifts in investors' portfolios of debt holdings than are other countries. The international use of thesecurrencies in turn stems from (i) the credibility of the countries' policies and institutions, (ii) the strength of theirfinancial systems, (iii) the countries' large and open capital markets, with market-determined interest and foreignexchange rates, and (iv) the use of their currencies as units of account in global capital markets. These characteristics
may push the external debt of these sovereigns to relatively high levels. But this does not present the same degree ofrisks as for countries with non-actively traded currencies, because these sovereigns' policy settings can more readilypreserve foreign investor confidence. The criteria differentiate between sovereigns with reserve currencies and thosewith actively traded currencies as follows.
65. Sovereigns with a reserve currency. A sovereign in this category benefits from a currency that accounts for morethan 3% of the world's total allocated foreign exchange reserves based on the IMF's report "Currency Compositionof Official Foreign Exchange Reserves," and the sovereign's global economic and political influence supports thisofficial demand. Demand for the debt of sovereigns that control reserve currencies tends to rise in periods of
economic stress (this is the so-called "flight to quality"). At the time of writing these criteria, this category ofsovereigns includes the U.S., the U.K., Japan, France, and Germany. The latter two, the largest members of the
eurozone, benefit, in our view, from the reserve currency status of the euro. Given that they account individually formore than 20% of the zone's GDP, it is unlikely that the ECB's monetary stance would be at odds with their

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economic fundamentals for a long time, as was the case with some of the smaller EMU members that suffered large
lending bubbles.
66. Sovereigns with an actively traded currency. A sovereign in this category benefits from a currency that accounts formore than 1% of global foreign exchange market turnover, based on the Bank for International Settlement (BIS)
report "Triennial Central Bank Survey," and which is not a reserve currency as defined above. At the time of writingthese criteria, this category includes Australia, Switzerland, Canada, Hong Kong, Sweden, New Zealand, Korea,
Singapore, Norway, and Mexico. In addition, all eurozone countries are included, with the exception of France andGermany, which are included in the previous category. This list may vary over time.
67. For countries with a reserve currency or an actively traded currency, the analysis focuses on a measure of external
indebtedness, defined as the ratio of narrow net external debt to current account receipts, as explained in paragraph73 and reflected in table 5. The more flexible monetary position of these countries allows less reserve accumulationand permits higher short-term debt levels compared to the sovereigns with less monetary flexibility, making
quantitative comparison based on an external liquidity ratio (described in paragraph ) less meaningful.
68. For the other countries, the criteria combine the assessment of a sovereign's international investment position withthe analysis of its external liquidity to derive its initial external score (see table 5).

b) External liquidity
69. The key measure of a country's external liquidity is the ratio of "gross external financing needs" to the sum of
current account receipts plus usable official foreign exchange reserves (see the glossary in Appendix A).
70. The "gross external financing needs" in table 5 is the average of the current-year estimate and forecasts for the next
two to three years. Standard & Poor's forecasts a country's gross external financing needs first by reviewing thecountry's historical balance of payments and international investment position, the official government and thecentral bank's own forecasts (when available), and those of independent economists and the IMF. In addition,
Standard & Poor's independently estimates a sovereign's gross external financing needs based on information about
the country's expected imports, the terms of trade, and external debt structure. When compositional data on thetenors of private sector external debt are not available, Standard & Poor's makes estimates based on observations of
the international investment positions of other countries at similar stages of development when this information isavailable. In cases where one-off items (i.e., items unlikely to repeat in the next three to five years) distort the period
average, then the score is based on the level of future external liquidity adjusted for the one-off items.
71. Usable foreign exchange reserves represent the sum of liquid claims in foreign currency on nonresidents under thecontrol of the central bank and gold holdings. The calculation of usable foreign exchange reserves is explained inAppendix A. For most sovereigns, usable foreign exchange reserves serve as a financial buffer during periods ofbalance-of-payments stress. However, sovereigns with freely floating exchange rates and deep foreign exchange
markets typically hold a low level of reserves. Their central banks are usually not called upon to be last-resort sellers
of foreign exchange, and a single external borrower having trouble rolling over its debt does not threaten the foreignexchange regime.

c) External indebtedness
72. Standard & Poor's key measure of a country's external indebtedness is the ratio of "narrow net external debt" tocurrent account receipts (see the glossary in Appendix A).
73. The term "narrow" in the description of net external debt refers to a more restricted measure than some widely used

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international definitions of net external debt. The calculation of "narrow net external debt" subtracts from grossexternal indebtedness only the most liquid external assets from the public sector and the financial sector (seeAppendix A for more details on this calculation). The criteria use this special definition for two reasons. First,
financial sector assets are generally more liquid than those of the non-financial private sector. Second, most financial
institutions manage external assets and liabilities, which is not the case for many non-financial private sector
entities, some of which may be primarily holders of assets, and others primarily holders of liabilities. In a downside
scenario, private sector entities may transfer their assets in the domestic financial system to foreign accounts.
74. A sovereign's external score equals the initial score derived from table 5, adjusted by up to two categories based on
the net effect of the positive and negative qualitative factors listed in the table. The paragraphs following the tableprovide a detailed explanation for each adjustment factor.

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptionsd) Adjustments for the trend and funding composition of the balance of payments
75. Either of the following two conditions improves a sovereign's external score by one category as shown in table 5:• The sovereign controls an actively traded currency and displays a current account surplus on average over the last
historical year, the current year, and the next two forecast years.
• The country has significant and liquid non-financial private sector external assets and income-earning net direct
investment. This is as reflected by a net international investment position that is more favorable than the narrow
net external debt position by more than 100% of CAR.
76. One of the following conditions weakens a sovereign's external score by one category as shown in table 5:• The sovereign has an actively traded currency and displays a high current account deficit (consistently over 10%
of CAR), likely indicating a structural problem (competitiveness or overleveraged domestic economy, or both), or
its external short-term debt generally exceeds 100% of CAR.
• There is a risk of marked deterioration in the country's external financing, based on our qualitative assessment of
the following factors: (i) a sudden reduction in the availability of official funding due to non compliance with theprogram's conditions (for countries reliant on an IMF or similar program); (ii) a sudden reduction of cross-borderinterbank lines resulting from perceptions of increasing stress in the financial sector; (iii) a sudden loss of
non-resident deposits, due to the importance of non-resident deposits in relation to the size, concentration andvulnerabilities of the national banking system. This sudden loss might result from a wide-spread change inregulatory environment or country-specific developments hurting the country's reputation as a stableinternational financial center. This risk is further exacerbated if these non-resident deposits are on-lent onshore;(iv) a sudden shift in foreign direct investments or portfolio equity investments, especially in countries where thenet external liability position is substantially worse than the narrow net external debt position (by over 100% of
CAR).
• The country is exposed to significant volatility in terms of trade (see Appendix A) due to a narrow orconcentrated export base (including commodity-exporting countries), as measured for instance by a standard
deviation of the change in terms of trade that exceeds 10%, unless the country has a large net external asset
position (over 50% of CAR) to compensate for this volatility.
• The country's low external debt or low external financing needs reflect debt constraints such as lack of market
access, recent debt rescheduling (improving the amortization profile), debt forgiveness, or other similar
characteristics, all of which suggest external vulnerabilities despite the seemingly strong ratios. Or the country hasarrears on the official external debt.
• The country's balance of payments has significant stock-flow mismatches or other gaps/inconsistencies between
the balance of payments and the international investment position.

e) Specific considerations for members of currency or monetary unions
77. Each sovereign that belongs to a currency or monetary union receives an external score based on its individual
external performance, using table 5 and depending on the currency of the union. This is because the externalliquidity and balance sheet situations of members of a currency union may vary greatly, even though they all share acommon currency and common capital markets. Where a currency union member displays a sizable and sustained
current account deficit, no exchange rate pressures are likely to ensue, since exchange rate movements are more
likely to be a function of the political and economic characteristics of the union as a whole. However, a member's
large and sustained current account deficit may be a sign of poor competitiveness or an overleveraged domestic
economy, or both. The loss of competitiveness is unlikely to be eased through exchange rate adjustments andStandard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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improvements may require an extended period of slow growth, possibly with deflationary implications. Conversely,
current account surpluses could be a sign of strong competitiveness and underpin a strong external creditor position.

f) Effect of official funding
78. A sovereign's participation in an official program, such as IMF programs, may affect the evolution of its external
performance. Successful IMF programs may result in breaking a downward trend or in a gradual improvement in acountry's external performance, which would be reflected through the forecasts used to assign the external score intable 5. IMF and other official programs are normally sought by sovereigns in countries with external funding
pressures. Governments often decide to seek programs as a form of political cover for difficult economic policy
decisions or as a way to address temporary or potential spikes in the cost of external financing. The
credit-supportive aspects of a program that provides funds include low cost external funding, the adoption ofpolicies likely to address sources of stress and improve fundamentals, and various forms of technical assistance.
However, program implementation is not always successful, because it is usually a challenge in a tough political andeconomic environment. In some cases, sovereign defaults occur subsequently.

4. Fiscal Score
79. The fiscal score reflects the sustainability of a sovereign's deficits and debt burden. This measure considers fiscal
flexibility, long-term fiscal trends and vulnerabilities, debt structure and funding access, and potential risks arisingfrom contingent liabilities.
80. Given the many dimensions that this score captures, the analysis is divided into two segments, "fiscal performanceand flexibility" and "debt burden" which are scored separately. The overall score for this rating factor is the average
from the two segments.

a) Fiscal performance and flexibility
81. To determine a sovereign's fiscal performance and flexibility score, these criteria first derive an initial score based on
the prospective change in nominal general government debt calculated as a percentage of GDP (see paragraph 82).
Then the initial score receives a positive or negative adjustment by up to two categories, based on the factors listed
in the table below. Those factors relate to a government's fiscal flexibility and vulnerabilities, as well as long-term
trends (see paragraphs 85 to 88).

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Fiscal performance
82. The key measure of a government's fiscal performance is the change in general government debt stock during theyear expressed as a percentage of GDP in that year. We believe that the former is a better indicator of fiscal
performance rather than the reported deficit. The deficit is sometimes affected by political and other considerations,
possibly creating strong incentives to move expenditures off budget. The calculation of this ratio is explained inAppendix A.
83. The change in general government debt used in table 6 is the average of the current-year estimate and forecasts forthe next three years. Our current-year estimate and forecasts are established first by reviewing the government's own
projections, as well as those of external institutions such as the IMF, and then by making adjustments, whennecessary to reflect the effect of economic growth prospects (see section VI.C.2) or the occurrence of contingent

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risks. In cases where the period average is distorted by one-off items that are unlikely to recur in the next three tofive years, the score is based on the level of change in general government debt adjusted for the one-off items.
84. The criteria focus on measures at the general government level, which is the aggregate of the national, regional, andlocal governments, including social security and eliminating intergovernmental transactions. This measure better
captures the economic effect of the fiscal policy stance and is most closely aligned with issues relating tomacroeconomic stability and economic growth. In addition, general government measures are the most usefulcomparator because the division of revenue-raising authority and expenditure responsibility differs between
countries, while all tiers of government ultimately rely on the same population to pay taxes. In addition a sovereign
generally has the strongest influence over the distribution of public sector responsibilities between different tiers ofgovernment.

Fiscal flexibility, long-term fiscal trends and vulnerabilities
85. Fiscal flexibility provides governments with the "room to maneuver" to mitigate the effect of economic downturns
or other shocks and to restore its fiscal balance. Conversely, government finances can also be subject tovulnerabilities or long-term fiscal challenges and trends that are likely to hurt their fiscal performance. The
assessment of a sovereign's revenue and expenditure flexibility, vulnerabilities and long-term trends is primarily
qualitative.
86. One of the following conditions improves a sovereign's fiscal performance and flexibility score by one category as
shown in table 6:• The government is able and willing to raise revenues through increases in tax rates, in tax coverage, or throughasset sales in the near term. Revenue flexibility is a qualitative assessment based on the government's policy ortrack-record, but also taking into account the potential constitutional, political, or administrative difficulties, aswell as potential economic or social consequences of such measures.
• The government is able and willing to reduce general government expenditures in the near term despite theeconomic, social or political effect. Expenditure flexibility can be determined by looking at the level and trend of
public sector wages and entitlement expenditures (pensions and health care), its mix of operating and capital
expenditures, and the government's track-record and policy with regard to implementing expenditure cuts whenneeded.
• The general government has liquid assets available to mitigate the effect of economic cycles on its fiscal
performance.
87. One of the following conditions weakens a sovereign's fiscal performance and flexibility score by one category as
shown in table 6:• The government's revenue base is volatile, stemming, for example, from a high reliance on real estate turnovertaxes or royalties on the extractive industries (generally above 25% of revenues).
• The government has limited ability to increase tax revenues for instance due to a large shadow economy or low
tax collection rates, making an increase in tax rates ineffective.
• The country has a significant shortfall in basic services to the population and infrastructure, which is likely toresult in spending pressure for a long period of time, as reflected, for instance, by a "medium" or "low" UNDP
human development index.

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88. Age-related expenditures. Demographic change and population aging will be, and in some cases already are, major
challenges for public finances in many countries. Sovereigns are facing a decline in the working-age population andrising outlays for age-related spending items such as pensions and health care. While these burdens are in many cases
substantial, they generally peak in a horizon of 10 to 20 years, and they are gradually increasing, rather thansuddenly changing (see "Global Aging 2010: An Irreversible Truth," published Oct. 7, 2010). Consequently, insome cases, these potential drivers of future fiscal imbalances are far enough in the future to give governments
sufficient time to take steps to remedy them. When this is not the case, age-related budgetary pressures are includedin the assessment of a government's fiscal flexibility and long-term trends, and in our budgetary projections (seetable 6 above).

b) Debt burden
89. The debt burden score reflects the sustainability of a sovereign's prospective debt level. Factors underpinning asovereign's debt burden score are: its debt level; the cost of debt relative to revenue growth; and debt structure andfunding access. This score also reflects risks arising from contingent liabilities with the potential to become
government debt if they were to materialize.
90. The combination of those factors determines a sovereign's debt burden score as presented in table 7. The criteria
derive an initial score from two key measures of the general government debt level and cost of debt (see table 7).
Then, the initial score receives a positive adjustment by up to one category or a negative adjustment by as many as
three categories, based on our analysis of the government's debt structure, funding access and contingent liabilities.

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Debt level and cost of debt
91. The analysis of a sovereign's debt level focuses on the following two measures:• General government interest expenditures as a percentage of general government revenues; and• Net general government debt as a percentage of GDP.
92. The calculation of net general government debt (as defined in Appendix A) is generally more restrictive thannational measures of net general government debt, as it deducts from the general government debt only the mostliquid assets. For instance, the following assets are not deducted: (i) international monetary reserves held by thecentral bank, which are typically held for balance of payment purposes and not for budgetary support; (ii) loans toor investments in majority-government-owned companies; and (iii) assets for which liquidity might be impaired in asovereign stress scenario.
93. A sovereign's debt burden is assessed relative to its other credit characteristics, as explained in subparts VI.A andwww.standardandpoors.com/ratingsdirect

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VI.B, rather than as an absolute trigger at a given rating level. Governments can afford varying debt levels,
depending on their other credit characteristics. In particular, the debt level that a government can sustain is affectedby its monetary and fiscal flexibility, domestic capital market characteristics and by the credibility that it hasestablished in past periods of stress. A sovereign with an unblemished track record of honoring debt obligations, agrowing economy, and a strong domestic capital market providing fairly low-cost market-based financing may
sustain a higher debt burden than a sovereign with lower debt-to-GDP ratios but higher and more variabledebt-servicing burdens. Conversely, low debt burdens may reflect a lack of financing options and high interest costs,
or, in some cases, debt restructurings, rather than fiscal flexibility. Some governments with relatively low debt to
GDP levels have defaulted.

Access to funding and debt structure
94. For sovereigns in a fiscal debtor position, the debt score is one category worse than the initial score if at least two of
the four conditions below apply:• The central government debt has significant exposure to exchange rate movements and refinancing risk and, on
average, more than 40% of the debt denominated in foreign currency or the average maturity is typically less than
three years.
• Non-residents hold consistently more than 60% of the central government commercial debt.
• The debt service is vulnerable due to an amortization profile that varies by more than 5% of GDP one year to thenext or due to possible acceleration from puts or rating triggers.
• The resident banking sector balance sheet has a large share of central government debt (above 20%), indicating alimited capacity of the national banking sector to lend more to the central government, without possibly
crowding out private sector borrowing.
95. These measures help to assess a government's sensitivity to an increase in its refinancing costs and refinancing risk.
They are based on data at the central government level rather than general government. This is because sovereign
ratings address the ability of the central government to repay its own direct financial obligations, and not those ofother public sector entities or local and regional governments included in the scope of general government data.
96. When bilateral or multilateral official creditors are or are expected to become an important component of agovernment's creditor base, the access to this official funding usually depends on the ability of the government tosatisfy the conditions they impose. If the government is likely to satisfy those conditions and the official financing islikely to remain in place to cover the government's borrowing requirements and refinancing needs, the debt score ispositively adjusted (see table 7).

Contingent liabilities
97. Contingent liabilities refer to obligations that have the potential to become government debt or more broadly affecta government's credit standing, if they were to materialize. Some of these liabilities may be difficult to identify andmeasure, but they can generally be grouped in three broad categories:• Contingent liabilities related to the financial sector (public and private bank and non-bank financial institutions);• Contingent liabilities related to nonfinancial public sector enterprises (NFPEs); and• Guarantees and other off-budget and contingent liabilities.
98. In table 8, contingent liabilities related to the financial sector are assessed by estimating a country's banking sector's
potential recapitalization needs in a stress scenario. This assessment does not include, however, the broader fiscal

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cost for a sovereign that would derive from the economic downturn normally associated with a banking crisis and,more specifically, from the loss of tax revenues. Previous episodes of systemic banking crisis indicate that these costs
may be significantly larger for a sovereign than the direct recapitalization cost, although to degrees that could vary
widely.
99. As a result, the categories of contingent liabilities presented in table 8 below, ranging from "limited" to "very high,"should be interpreted as relative measures of risks. They provide only an indicative range of the potential direct costs
that could arise for a sovereign from its contingent liabilities, as opposed to the broader fiscal effect. This is why thisestimate of contingent liabilities is used as a qualifier when assessing a government's debt burden in table 7, and not
as a measure that could simply be added to the government's existing debt level.

100. Contingent liabilities related to the financial sector. The largest of these contingent liabilities is the risk posed by asystemic crisis in the financial sector. Contingent liabilities related to the financial sector are assessed by estimating
the potential recapitalization needs in case of a systemic banking crisis in an 'A' stress scenario. Such scenario,
defined in "Understanding Standard & Poor’s Ratings Definitions," published on June 3, 2009, corresponds to a
GDP decline by as much as 6%, an unemployment rise up to 15%, and the stock market drop by up to 60%. This
assessment involves several steps.
101. The first step consists in estimating the potential unexpected losses that a country's banking sector would incur overa three-year period under such stress scenario. This calculation uses the risk-adjusted capital (RAC) framework
explained in "Bank Capital Methodology And Assumptions" published Dec. 6, 2010. The calculation of the RAC
losses consist of estimating a bank's total risk-weighted assets by multiplying its main risk exposures by the relevantrisk weights, stated as a percentage. Risk weights adjust the exposures to reflect our view of their relative degree ofrisk. This means, the greater the risk we see, the higher the risk weight we apply. The main exposure categories inour computation are credit risk, market risk, and operational risk. The relevant risk weights are based on the
country's BICRA score, as these risks vary by jurisdiction (see "Request for Comment: Methodology For
Determining Banking Industry Country Risk Assessments," published May 13, 2010). This measure is calculated byusing Standard & Poor's data on rated banks and by extrapolating the estimated losses to the aggregated banking
sector. For countries with no or a very limited number of rated banks that are not representative of the banking

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptionsindustry, we use central bank data to build a simplified balance sheet for the aggregated banking sector and weapply risk-weighting similar to those of countries that have the most comparable banking sector.
102. The second step entails calculating the potential recapitalization needs for the banking sector under such stressscenario. This calculation is the difference between a banking system's aggregate total adjusted capital and the sumof (a) the above-defined RAC losses and (b) the capital needed in order to reconstitute a minimum capital base forthe domestic banking sector. We have fixed this minimum risk-adjusted capital at 7% of risk-weighted assets, whichcorresponds to the minimum regulatory Common Equity Tier 1 capital under Basel III (unless the national
requirements differ significantly from that level).
103. Some non-bank financial institutions (such as finance companies, securities dealers, or insurance companies) andpublic-sector financial enterprises (such as national development banks, export credit agencies, or housing
institutions), which may not be included in the above calculation, may affect sovereign credit standing when they areof material size. In the absence of comparable statistics for those sectors, the estimate of contingent liabilities for
those entities is done on an individual basis using an analytical framework similar to that described above inparagraph 100.
104. Contingent liabilities related to non-financial public sector enterprises (NFPE). NFPEs can pose a risk to asovereign because they are generally formed to further public policies and can suffer from weak profitability andnarrow equity bases, which may leave them vulnerable to adverse economic circumstances. NFPEs include most
government-related entities (GREs) that are outside the financial sector. These are enterprises, partially or totally
under government control, that we believe are likely to be affected by extraordinary government intervention during
periods of stress. (see " Rating Government-Related Entities: Methodology And Assumptions," published Dec. 9,2010).
105. The assessment of contingent liabilities related to NFPEs applies a loss estimate under a significant downside
scenario to NFPE borrowings from nonresidents (either multilaterals, financial corporations or in the internationalbond markets) and NFPE domestic market bond issuance, along the lines of paragraph 100. (NFPEs' borrowing
from the banking system is excluded to avoid double counting.) The borrowing from domestic financial institutions
is already included in the previous estimate of contingent liabilities related to the financial sector. This assessment
focuses on the largest NFPEs (typically those with debt of more than about 1% of GDP). It excludes the debt ofenterprises that have a stand-alone credit profile (SACP) in investment grade (for details on SACPs, see"Stand-Alone Credit Profiles: One Component Of A Rating," published Oct. 1, 2010), or for which we assess a'low' or 'moderate' likelihood of support under on our GRE methodology.
106. Guarantees and other off-budget and contingent liabilities. Contingent liabilities include other types of risks
including guarantees, when relevant in our view, such as:• The estimated potential loss on formal or implicit sovereign guarantees that are not already accounted for in theabove categories.
• Quasi-fiscal or other off-budget operations, such as, for example, extra-budgetary funds, securitizations, andpublic-private partnerships.

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5. Monetary Score
107. A sovereign's monetary score reflects the extent to which its monetary authority can support sustainable economic
growth and attenuate major economic or financial shocks, thereby supporting sovereign creditworthiness. Monetary
policy is a particularly important stabilization tool for sovereigns facing economic and financial shocks.
Accordingly, it could be a significant factor in slowing or preventing a deterioration of sovereign creditworthiness intimes of stress.
108. A sovereign's monetary score results from the analysis of the following elements:• The sovereign's ability to use monetary policy to address domestic economic stresses particularly through its
control of money supply and domestic liquidity conditions.
• The credibility of monetary policy, as measured by inflation trends.
• The effectiveness of mechanisms for transmitting the effect of monetary policy decisions to the real economy,largely a function of the depth and diversification of the domestic financial system and capital markets.
109. On one end of the continuum, a score of '1' corresponds to a sovereign with extensive monetary flexibility where themonetary authority is able to lower interest rates effectively or even expand its balance sheet significantly, andtherefore ease tight liquidity conditions without stoking inflationary pressures. This flexibility exists only formonetary authorities with high perceived policy credibility in countries with deep and diversified credit and capital
markets. This type of extensive monetary flexibility provides important benefits to contain financial crises and theirimplications for sovereign creditworthiness.
110. On the other end of the spectrum, a score of '6' corresponds to a sovereign without meaningful monetary flexibility.
Examples include sovereigns using the currency of another, sovereigns that apply extensive foreign exchange
controls affecting the current account, and countries with persistent high inflation. A sovereign with these
constraining features either has very limited or no flexibility to affect domestic economic conditions, including
liquidity, or has a poor track record in meeting monetary objectives. Where a sovereign does not have an
independent monetary policy, monetary conditions are mostly determined by factors outside the control of thedomestic monetary authorities and therefore cannot provide any meaningful buffer against domestic financial stress.
111. Table 9 below presents the characteristics expected for each score category between 1 and 5 for this factor. A
sovereign's initial score is derived from the majority of the sub-factors a), b), c) at a given level. When there is no
majority, it is based the average score of those sub-factors. The initial score can be adjusted by one or two categories
down based on the adjustment factors listed in the table.

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Criteria | Governments | Sovereigns: Sovereign Government Rating Methodology And Assumptionsa) A sovereign's ability to use monetary policy and the exchange rate regime
112. A sovereign can use monetary policy to address imbalances or shocks in the domestic economy only when it controls
the dominant currency used for domestic economic and financial transactions. The exchange rate regime influences
the ability of the monetary authorities to conduct monetary policies effectively, as monetary objectives may conflictwith objectives to sustain a certain exchange rate level. The more rigid the exchange rate regime, the more likely this
disconnect impeding the conduct of monetary policy.

b) Credibility of the monetary policy and inflation trends
113. Effective monetary policy requires credible institutions conducting it. While "credibility" cannot be objectively
measured, there are certain factors that generally make a central bank more credible and therefore effective in its
conduct of monetary policies. Operational independence is important for effective policy formulation andimplementation. Independence of central banks is itself not a measurable variable, but it usually goes hand in handwith institutional settings such as the nomination of members of the monetary policy board for defined terms, theprotection of board members from political interference, and the independence of central banks' budgets within theconfines of applicable public sector guidelines. The length of the period of independence is relevant, as reversing
independent monetary policy conduct may become harder the more entrenched its status has become.
114. Effective monetary policy is another important foundation for confidence in monetary authorities. Confidence isStandard & Poors | RatingsDirect on the Global Credit Portal | June 30, 2011

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crucial in a period of stress because it enables policymakers to resort temporarily to unconventional tools to counterthe effect of economic shocks (for example, implementing quantitative easing without triggering sharp increases ininterest rates). Monetary authorities with weak track records rarely have this flexibility.
115. A chief measure of effectiveness of monetary policy is low and stable inflation, which is the primary objective ofmodern monetary policy. Low and stable inflation is also an important foundation for confidence in local currencies
as a store of value and for the development of the financial sector. Consequently, sovereigns where persistently highconsumer price inflation prevails receive the weakest score (see adjustment factors in table 9). On the other hand, forsovereigns with the highest level of monetary flexibility, inflation is expected to remain well contained (defined as
averaging between 0% and 3% per year).

e) Monetary policy effectiveness and development level of financial system and capital markets
116. A financial system and capital markets are necessary to transmit monetary policy decisions to the real economy,
because monetary policy tools, such as policy interest rates, reserve requirements or open market operations, workby influencing the funding costs and conditions that households and businesses face. This influence is often weak
when the financial sector is in its early stages of development, when lending conditions are set by administrativemeans, or the use of foreign currency is prevalent. By contrast, a developed capital market allows for open market
operations and a financial system in which local-currency transactions facilitate a central bank's conduct ofmonetary policy.
117. Financial system and capital market developments can be assessed by evaluating the following factors:• A government's ability to issue, at market-determined rates, long-term fixed-rate nominal local-currency bonds,
which provides an indication of the confidence in a market's long-term liquidity. Better scores are associated witha higher proportion of local-currency fixed-rated bonds with a long maturity.
• The existence of an active money market and corporate bond market, and a developed banking system. The
availability of multiple sources of financing, both through capital markets and the banking system, reduces therisks of a funding squeeze when one funding channel faces difficulties.
• The share of bank intermediation in local currency, because monetary policy tools are more effective if a country
actively uses its local currency for domestic economic and financial transactions.

d) Case of sovereigns in a monetary union
118. The monetary score for sovereigns in monetary unions result from a two-step process. The first step assigns an initialscore to reflect our view of the effectiveness of the monetary policy of the union as a whole, based on thecharacteristics in table 9. The second step weakens this initial score by one category, reflecting the lower flexibility
that members of a monetary union generally have relative to sovereigns with their own central banks. The central
bank of the monetary union applies its monetary flexibility to the intended benefit of the zone as a whole and not of
individual member states. The score would be worse by two categories rather than one where the economy of asovereign in a monetary union is unsynchronized with the zone at large and displays prolonged price and wage
trends diverging strongly from the union average. In other words, the union's monetary policy stance would be
detrimental to a particular sovereign's creditworthiness.
119. In the case of a sovereign that leaves a monetary union, the monetary score would be based on the characteristics
outlined in table 9.

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D. Determining A Sovereign Local-Currency Rating
120. A sovereign's local-currency debt may be rated above its foreign-currency rating. Historically, we have observed
lower default rates on local-currency debt than on foreign-currency debt. Any divergence between sovereign local
and foreign-currency ratings reflects the distinctive credit risks of each debt type.
121. One might ask why sovereign local-currency ratings are not all rated 'AAA' given sovereigns' extensive powers
within their own borders, including the ability to print money. While the ability to print local currency gives thesovereign tremendous flexibility, heavy reliance on such an expansionary monetary stance may fuel the risk of very
high inflation or even hyperinflation, which may cause more serious political and economic damage thanrescheduling of local-currency debt. In such instances, sovereigns may opt to default on their local-currency
obligations.
122. The sovereign local-currency rating is between zero and two notches above the sovereign foreign-currency ratingbased on the following factors.
• Independent monetary policy: A government has greater capacity to pay its local-currency debt than its
foreign-currency debt only if it can manage its local currency independently. Absent exchange controls, it can dothis if it can set interest rates without regard to the currency's external value.
• Depth of the local currency capital markets. A sovereign has greater ability to conduct monetary policy the deeper
its capital markets and the broader its ancillary markets, including active secondary market trading. An important
incentive in continuing to service local currency-debt, when not servicing foreign-currency debt, is that the
local-currency debt may be a significant portion of the assets of local pension funds, banks, and otherprivate-sector entities, which represent not only voters, but also important elements of the local economy.
• Political and fiscal flexibility. If political or fiscal concerns are the dominant constraint on the rating, thesovereign is less likely to have sufficient flexibility to accord a higher priority to servicing local-currency
obligations.
123. The combination of those factors and effect on a sovereign's local-currency rating is outlined in table 10 below.

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124. Issue-specific considerations. There are two cases when our rating on a local-currency debt instrument might differ
from the sovereign local-currency rating:• When a government issues a local currency-payable debt instrument, for which debt service is linked to anothercurrency. This issue receives the same rating as that on the sovereign's foreign-currency debt because, in a stressscenario, we expect this debt type to behave much like foreign-currency debt, with debt holders exchanging the
local-currency debt service proceeds into foreign currency. A typical example of this kind of instrument was thedollar-indexed "tesobonos" that the Mexican government issued in its domestic market in the 1990s.
• When a government issues local-currency debt in the global capital markets and the debt documentation statesthat the obligations rank pari passu with foreign-currency obligations. This issue receives the same rating as thaton the sovereign's foreign-currency debt.
125. The approach does not reverse, however, for foreign-currency-denominated debt issued in domestic markets. Suchdebt always receives a foreign-currency rating to such debt. Foreign-currency debt issuance generally diminishes thebuffer that a domestic capital market can provide against economic and political shocks. We observe that such

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issuance often indicates domestic investors' lack of confidence in the local currency.

VII. APPENDICES
Appendix A. Glossary Of Key Indicators And Data Sources
126. This section contains short definitions of the key economic terms used in tables 3 through 10. Most of thesemeasures are published twice a year in "Sovereign Risk Indicators," as well as in annual reports on individual
sovereigns.
127. Standard & Poor's draws its data for its analyses from both national and supranational sources. The data are foundin the national income accounts, fiscal accounts, monetary survey, balance of payments, and international
investment position compiled by national sources such as the national statistical agency, the central bank, theministry of finance, or other key line ministries. Supranational sources most commonly include Eurostat, central
banks of monetary unions, and the International Financial Statistics of the IMF.
Table 11

Glossary Of Key Indicators In Standard & Poor's Sovereign Rating Methodology
Terms

Definitions

Economic And Monetary Scores Key Indicators
GDP per capita (USD)
Total US dollar market value of goods and services produced by resident factors of production, divided by population.
Real GDP per capita (% change)

Percent change in constant-price per capita GDP.

Consumer price index (%change)Average percent change in index of prices of a representative set of consumer goods bought by a typical household
on a regular basis.

Domestic claims (% change)

Percent change in outstanding resident depository institution claims (at year end) on the resident private sector andnonfinancial public sector enterprises (NFPEs). May include claims by resident non-depository institutions, wherethese institutions are of systemic importance.

Monetary base

The monetary base consists of local currency in circulation plus the monetary authority's local currency liabilities toother depository corporations. The latter normally consists of these depository institutions deposits at the central
bank plus central bank securities that can be used in satisfying reserve requirements, though there are national
differences in definitions.

External Score Key Indicators
Current Account Receipts (CAR) = Proceeds from exports of goods and services + factor income earned by residents from nonresidents + official andprivate transfers to residents from nonresidents.
In which:
Factor income = compensation of employees + investment income earned by residents from nonresidents
Gross external financing needs(% of CAR plus usable reserves)= Gross external financing needs/ (CAR + usable reserves) .
In which :Gross external financing needs = current account payments + plus short-term external debt at the end of the prioryear + non-resident deposits at the end of the prior year + long term external debt maturing within the year).
In our projections of gross external financing needs, we make in adjustment in cases where we expect a shift in theportfolio of investments due to weakening economic fundamentals or changes to the regimes for taxes or capital
repatriation.

Narrow net external debt/CAR (%)= Narrow net external debt/CAR
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Table 11

Glossary Of Key Indicators In Standard & Poor's Sovereign Rating Methodology (cont.)
Narrow net external debt = stock of foreign and local currency public and private sector borrowings from nonresidents- liquid external assets
In which:
Liquid external assets =official foreign exchange reserves+ other liquid assets of the public sector held by non-residents+ resident financial sector loans to, deposits with, or investments in nonresident entities.
The calculation of the narrow net external debt may exclude the external debt of foreign banks that do not havedomestic financial assets, when material.
Reserves

Reserves are monetary authority liquid claims in foreign currency (including gold) on nonresidents.

Foreign exchange usable
reserves= foreign exchange reserves - items not readily available for foreign exchange operations and repayment of external
debt
In which :Items not readily available for foreign exchange operations and repayment of external debt =reserves pledged as security for any loan, including gold repos (unless the loan is due within a year)+ mark-to-market losses on reserves sold forward+ reserves deposited in domestic financial institutions, including offshore branches+ required reserves on resident foreign currency deposits. (Required reserves on nonresident deposits are included inreserves because the nonresident deposits are included in the short-term external debt measure in the calculation.).
+ monetary base for sovereigns that have adopted a currency board or have a longstanding fixed peg with anothercurrency (because the reserve coverage of the base is critical to maintaining confidence in the exchange-rate link).

Current account balance/CAR(%)= current account balance/CAR
In which:
Current account balance = exports of goods and services - imports of the same + net factor income + official andprivate net transfers, as a percentage of current account receipts.

Net foreign direct investment(FDI)/GDP (%)= (direct investment by nonresidents - residents' direct investment abroad)/GDPNet FDI in the tradable sector = net FDI - investments in the non-tradable sector

Net external liabilities/CAR (%)= net external liabilities/CAR
In which:
Net external liabilities = (total external debt + stock of direct and portfolio equity investment from abroad) - (total
external assets)
In which:
Total external assets = official reserves + other public sector assets held by nonresidents + resident financial
institutions' assets held by nonresidents + resident non-financial sector assets held by nonresidents + the stock of
direct and portfolio equity investment placed abroad.

Terms of trade= exports price/imports priceIn other words, it means what quantity of imports can be purchased through the sale of a fixed quantity of exports.

Fiscal Score Key Indicators
General government
Change in general government
debt as a percentage of GDP

Aggregate of the national, regional, and local government sectors, including social security and other defined benefit
public sector pension systems, and excluding intergovernmental transactions.
= (General government debt at year-end - general government debt at prior year-end)/Annual GDP
For the calculation of the change in gross general government debt, the following items are adjusted:- Changes in cash reserves/deposits are deducted for governments that pre-fund deficits or that issue debt for the
purpose of market presence rather than budget funding.
- Changes in debt that are due to debt relief or debt restructuring are deducted.

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Table 11

Glossary Of Key Indicators In Standard & Poor's Sovereign Rating Methodology (cont.)- Large shifts in exchange rates that are not expected to be repeated- Quasi-fiscal activities that represent debt-like obligations are added (e.g., leases, project financing operations).
Net general government
debt/GDP (%)=(Gross general government debt - general government financial assets)/GDP
Gross general government debt includes the debt of government's asset management companies used for the
resolution of banks or other private sector bail-outs

General government financial
assetsGeneral government financial assets =general government deposits in financial institutions (unless the deposits are a source of support to the recipient
institution)+ minority arms-length holdings of incorporated enterprises that are widely-traded+ balances in defined-benefit pension plans or social security funds (or stabilization or other freely available funds)
that are held in bank deposits, widely-traded securities, or other liquid forms.
Defined-benefit pension fund balances invested in government debt are usually excluded from gross debt if thegovernment controls the fund, and thus are not included in assets.

Gross general government
debt/GDP (%)= Gross debt incurred by national, regional, and local governments/GDP
Internal holdings, including social security and defined benefit public sector pension fund investments in government
debt, are netted out.

General government
interest/general government
revenues(%)

Interest payments on general government debt/general government revenues

Central government debt service interest + principal repayment on central government debt/central government revenues/ central government revenues(%)

Appendix B. Application Of Standard & Poor's Ratings Definitions To Sovereigns
Emerging From Default
128. A sovereign that undertakes a debt rescheduling qualifying as a distressed exchange under our criteria would receive
a 'SD' rating (see "Rating Implications Of Exchange Offers And Similar Restructurings," published May 12, 2009).
However, emergence from default also can be a complicated analytical issue for a sovereign. Sovereigns often
undertake debt restructurings through exchange offers that, we find, rarely close the books on the restructured debt.
For a number of reasons, ranging from difficulty in contacting all debt holders to holdouts seeking payment inaccordance with original terms, we have observed that participation in sovereign distressed debt exchanges usually
does not reach 100%. This stands in contrast with corporate debt restructurings in the U.S. and in many otherjurisdictions, where all obligations are typically addressed in bankruptcy reorganization. A corporate reorganizing
outside of bankruptcy generally must continue payments on the holdouts' debt or face the prospect of an
involuntary bankruptcy filing.
129. Less common among sovereign defaults is the repudiation of debt, which most often follows a revolutionary changeof regime (as occurred in the Soviet Union in 1917, China in 1949, and Cuba in 1960). Standard & Poor's takes noposition on the propriety of government debt defaults, repudiations, and the like. Nor do we take a position on thecourse of negotiations (or the absence thereof) between creditors and the government about working out debt that is
repudiated, or on the parameters of any settlements between creditors and governments that could occur. Instead,Standard & Poor's places the defaulted obligations in "selected default" but its issuer credit rating reflects its current

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opinion of the creditworthiness of a sovereign government on a forward-looking basis. Historical defaults informour view to the extent that they suggest how political and economic risks could affect sovereign decision-making in
the future.
130. In general, Standard & Poor's sovereign ratings apply only to debt that the present government acknowledges as its
own. If there is no resolution of a default through the courts or by the parties involved, Standard & Poor's
eventually withdraws the default ratings based on the diminished prospects for resolution and the lack of relevanceof the default ratings in the context of the market. For example, Standard & Poor's has no rating on direct andguaranteed debt of the government of China issued prior to the founding of the People's Republic of China in 1949
because we first rated China in 1992, long after the new government repudiated pre-1949 debt.

Appendix C. Example Of Application Of The Methodology For A Sovereign
Receiving Official Funding
131. Paragraph 34 explains that the effect of this official funding on the recipient government's rating is reflected in threeof the five key rating factors: the political score (see subsection VI.C.1.e)), the external score (see subsection
VI.C.3.e)) and the fiscal score (see paragraph 96 and table 7). The purpose of this appendix is to illustrate thisapproach through an example. The example below illustrates a case of fiscal support program, aiming to cover agovernment's refinancing needs (as opposed to a case of balance of payment support aiming to address a country's
external funding pressures).
132. Sovereign X has a relatively wealthy but slowly growing economy (leading to an economic score of '3'). It displays
very large external imbalances (leading to an external score of '6'), large fiscal deficits and a very high debt burden(leading to a fiscal score of '6'), and little monetary flexibility but only modest inflationary risk (leading to amonetary score of '4'). Sovereign X is faced with a sharp rise in its funding costs and finds it difficult to refinance its
debt at a sustainable cost. In this context, it benefits from a lower-cost loan from an international public institutionthat covers its refinancing needs over the next three years. Continuous access to this loan entails conditions, such as
sovereign X committing to implementing a series of economic reforms and fiscal consolidation measures. The effectof this support program on sovereign A's rating could follow different scenarios:• Scenario 1. We believe that this program improves the predictability and effectiveness of X's policy making. It
positively affects its political score which is assessed at '3' based on table 3. At the same time, we estimate that A
is likely to meet the conditions attached to the loan, which covers its refinancing needs over the next two to three
years. As a result, its debt score is '5' based on table 7. External liquidity is unlikely to improve sufficiently toaffect the external score of '6.' In this case, sovereign X's indicative rating level appears as 'bb' in table 2 (before
any exceptional adjustment factor).
• Scenario 2. We believe that sovereign X's commitment to this program is not credible to the investors or the
population, such that policy outcomes or access to funding becomes more uncertain. This is reflected in thepolitical score of '4' based on table 3, while the debt score is '6' based on table 7. External liquidity is unlikely to
improve sufficiently to affect the external score of '6'. In this case, X's indicative rating level appears as 'b' intable 2 (before any exceptional adjustment factor).

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RELATED CRITERIA AND RESEARCH• Request for Comment: Sovereign Government Rating Methodology and Assumptions, Nov. 26, 2010
• Principles Of Credit Ratings, Feb. 16, 2011
• Introduction Of Sovereign Recovery Ratings, June 14, 2007
• Sovereign Credit Ratings: A Primer, May 29, 2008
• Sovereign Defaults at 26-Year Low, To Show Little Change in 2007, Sept. 18, 2006
• Sovereign Defaults and Rating Transition 2010 Update, Feb. 23, 2011
• Understanding Standard & Poor's Rating Definitions, June 3, 2009
• Credit Stability Criteria, May 3, 2010
• The Time Dimension Of Standard & Poor's Credit Ratings, Sept. 22, 2010
• Assessing The Impact Of Natural Disasters On Sovereign Credit Ratings, June 14, 2010
• Methodology: Banking Industry Country Risk Assessments, June 6, 2006
• Global Aging 2010: An Irreversible Truth, Oct. 7, 2010
• Sovereign Foreign And Local Currency Rating Differentials, Oct. 19, 2005
• Rating Sovereign-Guaranteed Debt, April 6, 2009
• Bank Capital Methodology And Assumptions, published on Dec. 6, 2010
• Rating Implications Of Exchange Offers And Similar Restructurings, May 12, 2009
• Request for Comment: Methodology For Determining Banking Industry Country Risk Assessments, May 13,2010• Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010
• Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010
These criteria represent the specific application of fundamental principles that define credit risk and ratings
opinions. Their use is determined by issuer- or issue-specific attributes as well as Standard & Poor's Ratings
Services' assessment of the credit and, if applicable, structural risks for a given issuer or issue rating. Methodology
and assumptions may change from time to time as a result of market and economic conditions, issuer- or
issue-specific factors, or new empirical evidence that would affect our credit judgment.
Additional Contacts:
Marie Cavanaugh, New York (1) 212-438-7343; marie_cavanaugh@standardandpoors.com
Olga Kalinina, CFA, New York (1) 212-438-7350; olga_kalinina@standardandpoors.com
KimEng Tan, Singapore (65) 6239-6350; kimeng_tan@standardandpoors.com
Christian Esters, CFA, Frankfurt (49) 69-33-999-242; christian_esters@standardandpoors.com
Kai Stukenbrock, Frankfurt (49) 69-33-999-247; kai_stukenbrock@standardandpoors.com
Frank Gill, London (44) 20-7176-7129; frank_gill@standardandpoors.com
Ivan Morozov, London (44) 20-7176-7159; ivan_morozov@standardandpoors.com

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