Sovereign weight approach key to RAM Ratings’ credit rating framework

Published on 08 Feb 2017.

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RAM Ratings published 55 ratings on the global and ASEAN scales in 2016. Under RAM’s approach, the concept of sovereign weight to reflect country risk as well as transferability and convertibility risk is key to the ratings of corporates, financial institutions and other entities. Today, RAM released a criteria paper - Sovereign Weight Explained - to elaborate on and clarify how sovereign weights are applied. 

“Based on our methodology, the ratings of non-sovereign entities are not constrained by the respective sovereigns’ ratings. Therefore, the rated entities’ inherent credit fundamentals will feature more prominently in their ratings,” highlights Esther Lai, Head of Sovereign Ratings at RAM.

Nonetheless, non-sovereign entities cannot be totally isolated from deteriorating economic conditions in the country; neither would they be able to circumvent the capital controls implemented when fiscal and external stress is elevated. “As such, sovereign weight is designed to better reflect these risks in the ratings of non-sovereign entities, without the undue influence of the sovereign’s creditworthiness,” she adds. 

The criteria paper, Sovereign Weight Explained, can be retrieved from our website, www.ram.com.my.

Analytical contact
Esther Lai 
(603) 7628 1037

Media contact
Padthma Subbiah
(603) 7628 1162


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2017 by RAM Rating Services Berhad

Publication Date Published Category
Sovereign Weight Explained 08-Feb-2017 Criteria & Methodology View PDF