Moody’s upgrading criticized Skip to content

Moody’s upgrading criticized

By Iceland Review

The international investors service Moody’s upgraded the long-term credit rating of the Icelandic banks on Friday to Aaa, the highest rating available, a highly controversial move.

According to Morgunbladid, Moody’s upgrading was a pleasant surprise for Iceland, but experts at the Royal Bank of Scotland, Dresdner Kleinwort and Société Générale have criticized the decision.

They say Moody’s upgrading is contradictory to the current market situation and claim investing in debentures in the Icelandic banks, Glitnir, Landsbanki and Kaupthing, is considerably riskier than in other banks with the same credit rating.

This is not the first time that Moody’s evaluation of the Icelandic economy is contradictory to the market. Morgunbladid reports the final test is whether the market moves towards Moody’s decision.

Lynn Valkenaar, a financial expert at Moody’s, told Morgubladid that although the Icelandic banks had been given a credit rating of Aaa, they had a C in financial strength, and that investors would take both ratings into account.

With Moody’s new evaluation methods, potential support from owners of banks and the authorities are considered, which resulted in the upgrading of the Icelandic banks, Valkenaar explained.

Valkenaar added in many cases the credit ratings of European banks had been underestimated, in light of the fact that no banks in Europe and gone bankrupt in the last few decades.

Click here to read yesterday’s story on Moody’s upgrading.

Sign up for our weekly newsletter

Get news from Iceland, photos, and in-depth stories delivered to your inbox every week!

* indicates required

Subscribe to Iceland Review

In-depth stories and high-quality photography showcasing life in Iceland!