For ratings agencies, ensuring the integrity and transparency of the ratings we produce is a guiding principle. Another important factor is transparency on the rating process. Never is this more important than in times of economic uncertainty and market volatility. Nervous investors and credit counterparties will always demand (and deserve) greater levels of disclosure and analysis.
In Europe, Middle East and Africa, each sovereign we rate at Standard & Poor’s is reviewed at least twice a year. Because we are bound by strict regulation, this review timetable is determined during the previous year and is publically available for all to see. The review dates are fixed. There is a continuous flow of data releases and other information throughout the year that can have an impact on a sovereign rating.  Also, as our ratings are forward looking, our expectations about the future tend to be more important for the rating than historical data.
It is not only fiscal data and expectations, but numerous macroeconomic factors that form the basis of our sovereign ratings. Indeed, we have observed that external imbalances — i.e. current account balances and capital movements — can be more meaningful predictors of sovereign creditworthiness than fiscal data alone. The basis of our sovereign ratings is our expectations on a variety of qualitative and quantitative factors, including institutional effectiveness and stability, economic growth and diversification, and monetary policy flexibility.  
A critical part of the rating process is looking beyond the short-term noise of day-to-day market fluctuations. It is important to rate sovereigns through the typical economic cycle. We do not rate to quarterly — let alone monthly — data releases, nor to short-term expectations or budgets for just the next 12 months. Hence, a country’s annual budget announcement is only one among many other factors that may have an impact on our thinking when it comes to assessing a sovereign’s credit worthiness over the medium-term.
What is more, the quality of information provided varies greatly across the markets we operate. As opposed to the audited annual statement of a corporate entity, a lot of macroeconomic data used for a sovereign rating is estimates, at best. For instance, it is not uncommon that national statistical offices revise previously published GDP data from time to time, whether in advanced or in developing economies. Inflation estimates may depend on the quality and methodology of data collection and calculation.  
To navigate this kind of landscape, Standard & Poor’s relies on a robust system that draws on a wide range of information and data to carry out our due diligence to form our own estimates and medium-term expectations.
This all helps in maintaining complete transparency through the ratings process.
In recent times, much has been made of our decision to rate Saudi Arabia on an “unsolicited” basis.
The process for rating sovereigns is typically initiated when the sovereign or its representative requests a rating. This request may lead to the sovereign engaging Standard & Poor’s to provide rating services. Such ratings are termed “solicited.” Other sovereign ratings are termed “unsolicited” because we do not have a rating agreement with the sovereigns in question. We rate these sovereigns on an “unsolicited” basis, as in the case of Saudi Arabia, when we believe there is significant market interest in them and there is also sufficient public information of reliable quality to support our analysis and ongoing surveillance.
In Saudi Arabia, where many of the corporates we rate have strong links to government, the cascade impact from a change in circumstance at a sovereign level can’t be ignored. As a result, we take the view that maintaining a sovereign rating, albeit an “unsolicited” one, is important for market transparency. This type of move is also quite a common occurrence. In fact, 11 of the G-20 nations we rate are “unsolicited”.
At the end of the day we believe that there’s value in a well-formed point of view, whether it be of a “solicited” or “unsolicited” nature. Our opinions and measures of risk are rooted in our deep experience. This all allows investors and credit counterparties to make better decisions about purchasing bonds and sukuk, enabling more efficiency in trade and capital flows.

• Christian Esters is a senior director, Sovereign Ratings, at Standard & Poor’s Rating Services in Dubai.