sovereign risk

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Sovereign risk

The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of foreign exchange contracts. Also refers to the risk of government default on a loan made to a country or guaranteed by it. The government's part of political risk.

Sovereign Risk

In foreign exchange, the risk that a foreign central bank will significantly alter its monetary policy or other foreign exchange regulations so that it significantly affects one's currency trades. More broadly, it can apply to any political risk that a nation will refuse to comply with an agreement to which it is a party. For example, if one conducts a currency trade involving a pegged currency and the country in question decides to let its currency float, it can significantly impact the profitability of the currency trade. See also: Liquidity risk, Credit risk.

sovereign risk

The risk of owning the security of an issuer in a country other than the one in which the investor lives. For example, an investor residing in the United States incurs sovereign risk in purchasing a bond issued by the government of Brazil. This risk stems from the fact that a foreign country may nationalize its private businesses, stop paying interest, or repudiate its debt.
References in periodicals archive ?
Sovereign risks are not addressed in Fitch's sensitivity analysis.
Evaluate and consider better market instruments to manage liquidity and price sovereign risks more effectively.
SOVEREIGN RISKS, EXCHANGE RATES AND CURRENCY RISK PREMIA
Capital Intelligence (CI) has today announced that Commercial International Bank (CIB)'s Financial Strength Rating (FSR) is maintained at 'BBB-', constrained by Egypt's heightened sovereign risks derived from the balance of payments and/or currency crisis, coupled with ongoing economic pressures, elevated credit risk in the economy and asset concentrations.
This is no longer the case for ABank.The bank's IDRs and National Rating are driven by potential support from Commercial Bank whose IDR of 'A' is driven by Fitch's expectation of a very high probability of Qatari sovereign support for the bank, should it be required.Fitch "believes the Qatari authorities are highly supportive of their banking sector and, subject to an extent to sovereign risks in Turkey, would allow support to flow through to foreign subsidiaries should this be required reports Gulf Times.
Financial markets and public finance; sovereign risks, credit markets and fiscal federalism.
The "negative" outlook reflects the greater uncertainty and heightened macroeconomic and sovereign risks in Italy and Spain where Enel makes 65% of its earnings before interest, tax, depreciation and amortisation (EBITDA).
The objective of the 2010 EU-wide stress test exercise conducted under the mandate from the EU Council of Ministers of Finance (ECOFIN) and coordinated by CEBS in cooperation with the ECB, national supervisory authorities and the EU Commission, is to assess the overall resilience of the EU banking sector and the banks' ability to absorb further possible shocks on credit and market risks, including sovereign risks.
A: The overall objective of the stress testing exercise is to provide policy information for assessing the resilience of the EU banking system to possible adverse economic developments and to assess the ability of banks in the exercise to absorb possible shocks on credit and market risks, including sovereign risks.
Fitch executive Mia Koo told the press: "We believe the Salta transaction marks two trends that will continue through 2001--Argentina provincial debt issuance and increased use of political risk insurance to mitigate sovereign risks."
In some instances, particularly for sovereign risks, assessments by external agencies, such as Moody's Investors Services, may be used, at least initially.
The FSR is constrained by the Bank's considerable exposure to Egyptian government paper, ongoing sovereign risks related to the balance of payments and pressure on the currency, prevailing weak economic conditions and asset concentration risks.