INTERNATIONAL

CREDIT RA
TING AGENCIES

PRESENTED BY :

SHIVAM JAISWAL
BBA 5 C
 Credit Rating Agency

A credit rating agency is a company

that assigns credit ratings, which rate
a debtor's ability to pay back debt by
making timely principal and interest
payments and the likelihood of
default.
A credit rating can be assigned to
any entity that seeks to borrow
money— a corporation, a state or
provincial authority, or a sovereign
government.
 What are these ratings ?

The ratings given to such

securities are mostly
represented as AAA, AAB, Ba3,
CCC etc. It is very similar to a
marking system wherein the
highest rating AAA is given to a
borrower who has the highest
probability of paying back. In
that way, AAA is considered to
be one of the safest debt
securities to buy.
The Big 3 Credit Rating
Agencies

• Standard & Poor’s ( S&P )

• Fitch Ratings
• Moody's Investors Service
Standard & Poor’s
(S&P)
What Is Standard & Poor’s
(S&P) ?

Standard & Poor’s grew out of two

companies : Poor’s Publishing, a
publisher of railroad industry
guidebooks officially founded in 1868,
and the Standard Statistics Bureau ,
founded in 1906, which published
financial data on companies.
The two firms merged in 1941, to create
Standard & Poor’s.
How the Ratings Scale Works ?

An S&P credit rating is a letter grade. The

best is “AAA.” This rating means it is
highly likely that the borrower will repay
its debt. The worst is “D,” which means the
issuer has already defaulted.

A rating of BBB and above is called

“investment grade”—the safest sort of
investment. Ratings below that are
considered “speculative”—a greater degree
of risk.
 How S&P Creates
the Ratings
S&P analysts create the ratings. They get
information from published reports, such
as annual reports, press releases, and news
articles. They also interview the
management of the company they are
rating. Using these resources, the analysts
assess the company’s financial condition,
operating performance, and policies.
Relation between
Interest rates and
letter grade !
A bond that receives a high
letter grade can pay a lower
interest rate than one with a
lower grade. That’s because it
isn’t as risky, according to
S&P.
 S&P 500 Index

Standard & Poor’s also publishes

the S&P 500 .This is a stock
market index that tracks the
largest companies that are
publicly traded in the
U.S., making it a tool to
gauge the overall health of
large American companies.
Fitch Ratings
What is Fitch Ratings ?

Fitch Ratings is an award-winning international

credit rating agency that is headquartered in
both New York and London. It ranks among
the “Big Three credit rating agencies”.
Fitch Ratings provides forward-looking “credit
ratings” on investments, which reflects its
likelihood of default. The credit ratings
provided by Fitch are utilized by
investors, intermediaries (such as 
investment banks), issuers of debt, and
businesses and corporations.
 Brief History of Fitch Ratings

American economist John Knowles

Fitch founded Fitch Ratings in 1913.

In the 1920s, Fitch introduced the

AAA through D rating system, which
is now the most used rating
system in the credit rating industry.

In 1975, Fitch Ratings was recognized

as a nationally recognized statistical
rating organization (NRSRO) by the
Securities and Exchange
Commission (SEC).
 Fitch’s Rating Scales

The Fitch rating system is very similar to that of

S&P in that they both use a letter system.

The two most common rating scales by Fitch

Ratings are their :

1. Long-term issuer credit rating scale, and

2. Short-term issuer credit rating scale.
Long-Term Issuer Credit Rating Scale Short-Term Issuer Credit Rating Scale
Moody's Investors
Service
 
What is Moody's Investors
Service ?
Moody’s Investors Service, often
referred to as Moody’s, is the
bond credit rating business of
Moody’s Corporation.
Moody’s Investors Service
provides international
financial research on bonds issued by
commercial and government entities.
Moody’s, along with Standard
& Poor’s and Fitch Group, is
considered one of the Big Three credit
rating agencies.
 Moody's credit ratings
Moody's credit ratings Speculative grade
Investment grade

Rating Long-term ratings Short-term ratings Rating Long-term ratings Short-term ratings

Ba1
Aaa Rated as the highest quality and lowest credit risk.
Judged to have speculative elements
Ba2
Prime-1 and a significant credit risk.
Aa1 Best ability to repay short- Ba3
Aa2 Rated as high quality and very low credit risk. term debt
Aa3 B1
Judged as being speculative and a
A1 B2
high credit risk.
A2
B3
Rated as upper-medium grade and low credit risk. Prime-1/Prime-2
Best ability or high ability to Caa1
A3 repay short term debt Rated as poor quality and very high
Caa2
credit risk. Not Prime
Caa3 Do not fall within any
Prime-2 of the prime
Baa1 High ability to repay short
term debt categories
Judged to be highly speculative and
with likelihood of being near or in
Ca
Prime-2/Prime-3
default, but some possibility of
High ability or acceptable recovering principal and interest.
Baa2 Rated as medium grade, with some speculative ability to repay short term
elements and moderate credit risk. debt

Rated as the lowest quality, usually in

Prime-3 C default and low likelihood of
Baa3 Acceptable ability to repay recovering principal or interest.
short term debt
 INTERNATIONAL CREDIT RATING
AGENCIES
The United States : The United Kingdom :

1. A.M. Best Company, Inc. 1. European Rating Agency (ERA)

2. Demotech, Inc. 2. Fitch Ratings, Ltd.
3. Egan-Jones Rating Company
4. Fitch Ratings, Ltd. Colombia :
5. Kroll Bond Rating Agency, Inc.
6. Moody's Investors Service 3. BRC Investor Services S.A.
7. Realpoint, LLC 4. Duff & Phelps de Colombia, S.A., S.C.V
8. Standard and Poors (S&P)
9. TheStreet.com Ratings, Inc. China :
10.Veribanc, Inc.
5. Chengxin International Credit Rating Co., Ltd.
Canada : 6. China Lianhe Credit Rating, Co. Ltd.
7. Dagong Global Credit Rating Co., Ltd.
• Equifax 8. Shanghai Credit Information Services Co., Ltd.
9. Shanghai Far East Credit Rating Co., Ltd.
Nigeria : Japan :
1. Agusto & Co. Ltd. 1. Japan Credit Rating Agency, Ltd. (JCR)
2. CMC International, Ltd. 2. Mikuni & Co., Ltd.
3. Rating and Investment Information, Inc.
Rating organizations in India : (R&I)

3. Credit Analysis & Research Ltd (CARE) Poland :

4. CRISIL, Ltd.
5. Investment Information and Credit Rating • Central European Rating Agency (CERA)
Agency (ICRA)
6. ONICRA Credit Rating Agency of India, Ltd. Korea :
7. SME Rating Agency of India Limited (SMERA)
1. Korea Investors Service, Inc. (KIS)
Mexico : 2. Korea Ratings Corporation
3. National Information & Credit Evaluation,
8. HR Ratings de Mexico, S.A. de C.V. Inc. (NICE)
9. Interfax Rating Agency (IRA) 4. Seoul Credit Rating & Information, Inc.
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you all learned
something new.