The absence of these conditions will lead to lower ratings.
Banks are the major financial intermediaries in most countries.
They utilize the savings and chequing deposits of their customers to extend loans, primarily to investors. When banks are owned and operated by the government, political considerations are likely to play a larger role in the allocation of capital. When market forces are used to allocate capital, most of the credit will be extended to private investors. Thus, the ratings for Component VII-B are directly related to the share of domestic bank credit extended to the private sector. The larger the share of total domestic credit allocated to the private sector, the higher a country's rating.