OREANDA-NEWS. Fitch Ratings has updated its Country Ceiling criteria, with no material changes. The main difference is that African monetary arrangements are now treated in a similar way to the eurozone, making differentiation in Country Ceilings between individual member states of these arrangements possible.

Country Ceilings capture the risk of capital or exchange controls being imposed that would prevent or materially impede the private sector's ability to convert local currency into foreign currency and transfer the proceeds to non-resident creditors - transfer and convertibility (T&C) risk. Country Ceilings are not ratings but rather a key analytical input and constraint on the foreign-currency ratings of entities and transactions originating in the sovereign's jurisdiction.

Fitch assesses the likelihood of the imposition of capital or exchange controls or a formal or informal moratorium on private-sector external debt by evaluating the incentives faced by the individual country's authorities to impose such controls and the costs and benefits involved.

Country Ceilings are determined by sovereign rating committees for all countries with Fitch-rated sovereign issuers. Rating committees are aided by Fitch's Country Ceiling model, but may decide to deviate from the model outcome. The relevant rating committee can decide a maximum uplift over the Issuer Default Rating (IDR) of three notches, unless the ceiling concerns a member of a currency union or supranational monetary arrangement.

Fitch imposes a maximum Country Ceiling uplift of six notches above the Foreign-Currency IDR for each member country of the eurozone, the Central African Economic and Monetary Community (CEMAC), the West African Economic and Monetary Union (WAEMU) and the Common Monetary Area (CMA).

Previously, the Country Ceilings of all member countries of the African monetary arrangements were linked to the Foreign-Currency IDR of the dominant sovereign in the grouping - France for CEMAC and WAEMU, and South Africa for CMA. The change in the criteria for these three arrangements reflects Fitch's view that T&C risk can differ among their member countries. The Country Ceiling was already limited to a maximum of six notches above the Foreign-Currency IDR of the other members of each grouping.