Until recently, financial strength and credit ratings were used only as tools for the work of participants in the stock markets. Now the situation has changed. The activities of rating agencies have covered a much larger area, helping the mass consumer to make the right choice in favor of a particular bank or insurance company. And that's exactly what the average citizen needs. That is why it is worth understanding what ratings are. And it’s worth starting with their appearance.
Ranking history
In general, this system was first used over a century ago. At the end of the nineteenth century, financial strength and credit ratings began to be used in the United States. At first, they were assigned only to bond issuers, and they served as a tool for professionals trading in the stock markets. And only twenty years ago they stopped using this indicator as a regulatory lever for assessing creditworthiness. If we talk about what ratings are, then it is worth noting that until recently they were not used as one of the characteristics for choosing a suitable bank, insurance or creditorganizations. In the world, this system was not used, as it was quite difficult for ordinary citizens to understand, which is why it was not in demand.
Now many may wonder what a bank rating is. Indeed, recently it has been used to determine the financial stability of institutions, as well as to understand which companies and structures it is worth working with the population, small and medium-sized businesses. That is why the role of ratings has recently become very significant, and they are now being used more and more actively.
Daily use
Now that everything has become more or less clear with the question of what ratings are, it is necessary to touch on the issues related to their use in everyday life. And here they will be useful for understanding which business can be called more stable, as well as reliable, in order to determine whether it is worth working with certain insurance companies and other financial institutions.
So, what are ratings, you have already understood, now you can move on to significant points. The first is very important, as it concerns the financial strength ratings assigned by specialized agencies. In general, the analysis received from financial advisers and market analysts belongs to the field of assessing the quality of services provided. It turns out that the use of financial strength ratings has nothing to do with the assessment of the bank itself, the service, the insurance company, the convenience of working with a financial institution or a manager.firm. This is only an assessment of the very position of the organization.
What is a bank rating?
This parameter in the description of a financial institution can be used to understand whether it is reliable or not. That is, to determine the likelihood of a bank or insurance company fulfilling its direct obligations to the client. However, the rating does not answer the question of whether it will be convenient for you to work with the institution, how good and comfortable its website is to use, how many offices it has, where you can go at any time to get all the necessary information or services.
Use in other situations
If we are talking about an insurance company, then here, too, such a parameter as a high rating is not indicative. From it it will not become clear how exactly the company works with its clients, whether it is suing them for payments, which is now a very common practice.
That is why the use of ratings cannot be called the only tool for choosing an insurance company or bank. It is also necessary to pay attention to the list of services provided, the usability of the service through the site, the ease of use of offices, the number of negative and positive reviews about this organization. So, if we talk about what ratings are, then they can be called only one tool that is required to make the right choice, cut off the least reliable banks and insurance companies, as well as to work with more stablefinancial institutions.
Rating score
In Russia, many banks and insurance companies have recently been left without licenses and went bankrupt due to the current situation. The financial sector survived the economic crisis very hard, and some large structures even remained without licenses. This is what speaks of the need to be very careful in choosing banks and insurance companies that you can trust. As a rule, institutions that lost their licenses and went bankrupt had a rather low rating, but not all of them. There are also examples of how banks with sufficiently high indicators of financial stability experienced significant problems, which caused them to go bankrupt. And here we cannot speak of a mistake made by specialized agencies. Their assessment is a characteristic of the likelihood of bankruptcy or some kind of financial problems.
Personal rating
The same can be said when answering the question about what is a personal rating. It is written for individuals whose activities may have an impact on the work of others. For example, a rating of traders on the stock exchange is formed, showing who works and how. This indicator is not a guarantee that everything will continue to be at the same level, but it gives an idea of the method and principle of activity.
How are financial strength ratings determined?
This issue can be discussed in more detail. It is important here to define whatthis, and how the rating agencies calculate their performance by assigning certain points to insurance companies, banks, and other financial institutions.
So, if the meaning of the word "rating" has become clear, then it is worth considering it in the context of financial institutions. Under this indicator lies an estimate of the probability of bankruptcy. In simple terms, it speaks of the possibility of a bank or insurance company not fulfilling obligations to customers, depositors, creditors, and also insured persons. There is a more complex definition, but in this case it is quite possible to say that the probability of such a situation occurring is the main and most important point.
Ratings in other areas
As practice shows, the use of such an assessment parameter is appropriate not only in the financial sector, but also in the gaming one. So, it is worth saying about what a rating is in WoT. The game World of Tanks, which has become very popular recently, uses a rating system that shows how well each of the gamers plays. However, now many people have a question about what the WN6 rating is. The formula for this indicator uses the number of frags, damage de alt, and other characteristics give a small percentage. This rating cannot be boosted like the old one, since base capture points and other insignificant points are not taken into account here, which allows you to better assess the player's abilities.
As you can see, latelyrating system is becoming more and more popular in all walks of life.
