Rating firms may just have got it wrong on Iceland -- again
THE credit rating companies that were too slow in predicting Iceland's economic collapse in 2008 may be underestimating the strength of its resurrection.
Fitch Ratings said in May it might take two years for the island to shed its junk status, while Moody's and Standard & Poor's give Iceland their lowest investment grades. That hasn't deterred investors from trying to buy twice the amount offered in last month's $1 billion bond sale.
"When you look at how successful that auction was, it's clear that investors are now crunching the numbers themselves and that the credit grades from the rating agencies are less relevant," Valdimar Armann, an Icelandic economist said.
Iceland's experience shows the rating companies may be overcompensating after failing to identify some of the risks that led to the global financial crisis, he said. (Bloomberg)