Rating of municipalities

The municipal sector represents a market segment that is interesting for investors from the aspect of multiplicity of investment opportunities and development potential. The rating analysis – as an impartial evaluation – brings basic information to investors and partners related to risks that towns are confronted with and to way how to deal with such risks. The objective of our agency is to provide for a sufficient amount of transparent information related to municipal entities, evaluate their risks and, in this way, encourage the development in the area of municipal funding.

The benefit of rating evaluations represents an appreciable added value even for evaluated entities such as towns or other municipalities. The main benefit for towns consists in the possibility to present in public their own financial results and thus enable the market to have an independent external view on their economic activities. In addition to a financial view the municipality rating analysis contains also the analysis of control and management processes of the municipality having for benefit the formulation of an opinion made by an independent evaluator with respect to efficiency of internal processes  that enables the municipality to put in action development incentives resulting from this analysis.

What are the benefits of rating for the municipality and what does the rating of the municipality serve for:

Rating as an investment analysis

  • Based on an assigned rating, financing banks and investors may assign interest rate related to financial resources corresponding to the rating evaluation
  • It creates a platform aimed at negotiating commercial conditions with commercial partners of the municipality

Rating as a report on the economic activity of the municipality

  • It is a comprehensive analytic document that illustrates historical development and situation of the municipality from the aspect of an independent evaluator based on international criteria
  • It gives its opinion with respect to future intentions and plans of the municipality
  • It serves as a manifestation of transparency and openness of municipality representatives toward the population.

 Rating as an instrument of operative control

  • It provides the municipal management and the local authority with immediate information on the municipality situation and with the recommendations aimed at improving the economic activities of the municipality.

Rating of municipalities is a product that evaluates, on an independent basis, risks related to the ability and willingness of the municipality to comply with its future liabilities. The specificity consists in the fact that municipal entities do not belong among typical business and entrepreneurial entities. In consideration of a specific nature of municipal entities, EUROPEAN RATING AGENCY, a.s. in its rating evaluation applies specific methodology and procedures taking into account this exact position within the territorial administration of the country and respecting the role and functions fulfilled in a certain economic environment.

The rating process consists of gathering and processing of reference documents submitted by the municipality, of analysis and evaluation of reference documents by the rating agency and of approval of the rating by the rating committee.

The rating analysis remains valid for the period of 1 year and during this period the municipal entity is being monitored by the rating agency.

The content of the rating report includes effects determining and affecting the quality of municipal entities, such as development of macroeconomic environment, political risk, development of municipal sector, economic characteristic of the region and evaluation of the entity itself.