International Credit Rating Agency

Introduction

Credit rating agency is a company which rates the debtors on the basis of their ability to
pay back the debts, in a timely manner. They rates large scale borrower’s weather
companies and govt.
So now comes to our main topic, international credit rating, so here the global credit
rating industry is highly concentrated, with three agencies—Standard & Poor's, Moody's
and Fitch—controlling nearly the entire market. Together, they provide a much-needed
service for both borrowers as well as to the lenders. They intend to give the market
information that is both reliable and accurate about the risks associated with certain
kinds of debt.

S&P and Moody's are based in the US, while Fitch has dual-headquartered in New York
City and London, and is controlled by Hearst. As of 2013 they hold a collective global
market share of "roughly 95 percent with Moody's and Standard & Poor's having
approximately 40% each, and Fitch around 15%.

According to an analysis by Deutsche Welle, "their special status has been cemented
by law — at first only in the United States, but then in Europe as well. From the mid-
1990s until early 2003, the Big Three were the only "Nationally Recognized Statistical
Rating Organizations (NRSROs)" in the United States.

About S&P

S&P Global Ratings (previously Standard & Poor’s) is an American credit rating

agency (CRA) and a division of S&P Global that publishes financial research and
analysis on stocks, bonds, and commodities. Its head office is located on 55 Water
Street in New York City. It has a total of 17 ratings which can be assign to corporate and
sovereign debt. It is the world’s leading provider of independent credit ratings. There
ratings are essential for driving growth, providing transparency and helping educate
market participants so that they can make decisions with confidence. They have more
than 1 million credit ratings outstanding on government, corporate, financial sector and
structured finance entities and securities. S&P provide their opinions and research
about relative credit risk; market participants gain independent information to help &
support the growth of transparent, liquid debt markets worldwide. It is a division of S&P
Global (SPGI), which provides essential intelligence for individuals, companies and
governments to make decisions with confidence.
Background of S&P

Henry Varnum Poor first published the "History of Railroads and Canals in the United
States" in 1860, the forerunner of securities analysis and reporting that would be
developed over the next century. Standard Statistics formed in 1906, which published
corporate bond, sovereign debt, and municipal bond ratings. Standard Statistics merged
with Poor's Publishing in 1941 to form Standard and Poor's Corporation, which was
acquired by The McGraw-Hill Companies in 1966. Standard and Poor's has become
best known by indexes such as the S&P 500, a stock market index that is both a tool for
investor analysis and decision-making, and a U.S. economic indicator.

Moody’s

Moody's Investors Service is a leading provider of credit ratings, research, and risk
analysis. Its commitment and expertise contributes to transparent and integrated
financial markets. Its Investors Service is a subsidiary of Moody's Corporation (MCO),
whose reported revenue is $4.2 billion in 2017, and its employs is approximately 12,300
people worldwide and maintains a presence in 42 countries.

Moody's Investors Service, often referred as Moody’s, is the bond credit

rating business of Moody's Corporation, representing the company's traditional line of
business and its historical name. Moody's Investors Service provides international
financial research on bonds issued by commercial and government entities. The
company ranks the creditworthiness of borrowers using a standardized ratings scale
which measures expected investor loss in the event of default.

Background of Moody’s

John Moody and Company first published "Moody's Manual" in 1900. The manual
published basic statistics and general information about stocks and bonds of various
industries. From 1903 until the stock market crash of 1907, "Moody's Manual" was a
national publication. In 1909, Moody began publishing "Moody's Analyses of Railroad
Investments," which added analytical information about the value of securities.
Expanding this idea led to the 1914 creation of Moody's Investors Service, which, in the
following 10 years, would provide ratings for nearly all of the government bond
markets at the time. By the 1970s Moody's began rating commercial paper and bank
deposits, becoming the full-scale rating agency it is t
Fitch

Fitch Ratings Inc. is an American credit rating agency which is one of the

three nationally recognized statistical rating organizations (NRSRO) designated by
the U.S. Securities and Exchange Commission in 1975. It has dual headquartered
in New York and London. Fitch Ratings and Fitch Solutions are part of the Fitch Group.
The firm was founded by John Knowles Fitch on December 24, 1914, in New York City
as the Fitch Publishing Company. Fitch Ratings is the third largest nationally recognized
statistical rating organizations (NRSRO) rating agency, covering a more limited share of
the market than S&P and Moody's, though it has grown with acquisitions. They also
provide help to their investors to make important credit judgments with confidence. It
has operations in more than 30 countries, which comprised of: Fitch Ratings, Fitch
Solutions, and Fitch Learning. And it is owned by Hearst (who is a leader in diversified
media, information and services).

Background of Fitch

John Knowles Fitch founded the Fitch Publishing Company in 1913, providing financial

statistics for use in the investment industry via "The Fitch Stock and Bond Manual" and
"The Fitch Bond Book”. In 1923, Fitch introduced the AAA through D rating system that
has become the basis for ratings throughout the industry. With plans to become a full-
service global rating agency, in the late 1990s Fitch merged with IBCA of
London, subsidiary of Fimalac, a French holding company. Fitch also acquired market
competitors Thomson Bank Watch and Duff & Phelps Credit Ratings. Fitch began to
develop operating subsidiaries specializing in enterprise risk management, data
services, and finance-industry training starting in 2005 with the acquisition of a
Canadian company, Algorithmic, and the creation of Fitch Solutions and Fitch Training
(now Fitch Learning).

Credit Rating Scale

A credit rating can be the deciding factors on weather a borrower does or doesn’t
receive a loan. Good credit ratings allow companies, and government to easily borrow
from financial institutions. At the consumer level, banks will usually based the term of a
loan as a function of a credit rating or credit score, this typically means that the better
your credit rating, the better the terms of loan. On the other hand, if your credit rating is
poor, the bank may even reject your request for a loan. This can impact your ability to
obtain a mortgage or a credit card. Business and governments can benefit from high
credit rating as well. If a person has a track record of paying back loan in a timely
manner, that individual will probably have a high score. Low credit score are assigned to
people that have a history of making late payment or defaulting on loans.
Let us know about the credit rating scale of big three agencies

In prime categories the rating has highest credit quality, with lowest credit risk weather
In high grade categories the rating has very high credit quality with very low credit risk.
In upper medium grade categories the ratings have high credit quality with low credit
risk
In lower medium grade categories the ratings have good credit quality with currently low
credit risk.
In Non- investment grade- speculative element, issuer faces major uncertainties and
has adverse conditions.
In highly speculative categories the rating has high credit risk, but issuers still able to
meet its financial commitments.
In substantial risk issuers currently default weather
In extremely speculative the issuers are currently having high default.
In default categories having lowest rating in which they have default payment on
financial commitments.

Conclusion

A credit rating is a useful tool not only for investor, but also for the entities looking for
investor’s .An investment grade rating can put a security, company or country on the
global radar, attracting foreign money and boosting a nation’s economy. Indeed,
emerging market economies, the credit rating is the key to showcase their worthiness of
money for foreign investors, and because the credit rating acts to facilitate investments,
many countries and companies will strive to maintain and improve their ratings, hence
ensuring a stable political environment and better transparency.

Credit rating agencies can best serve markets when they operate independently, adopt
and enforce internal guidelines to avoid conflicts of interest and protect confidential
information received from issuers .credit rating agencies should be made accountable
for any faculty rating.