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Credit Ratings

Credit ratings provided by major rating agencies like Standard & Poor's, Moody's, and Fitch determine the risk level of investing in countries and companies based on their ability to manage liquidity and debt over the long run. These agencies assign ratings on a scale from AAA/Aaa to D based on research and data from over 100 countries, with higher ratings indicating lower default risk. While the ratings provide an opinion on investment risk, they are not guarantees of default probability.

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Genelle Soriano
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76 views2 pages

Credit Ratings

Credit ratings provided by major rating agencies like Standard & Poor's, Moody's, and Fitch determine the risk level of investing in countries and companies based on their ability to manage liquidity and debt over the long run. These agencies assign ratings on a scale from AAA/Aaa to D based on research and data from over 100 countries, with higher ratings indicating lower default risk. While the ratings provide an opinion on investment risk, they are not guarantees of default probability.

Uploaded by

Genelle Soriano
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Credit Ratings

Credit rating affects the confidence level of the investors to countries or companies. The
credit ratings are determined by companies that are recognized globally that objectively assigns
or evaluates countries and companies based on the riskiness of doing business with them. The
riskiness is primarily driven by their ability to manage their liquidity and solvency in the long run.
The higher the grade the lower the default risk associated to the country or company. These
three major rating companies are: Standard & Poor’s Corporation (S&P); Moody’s Investors
Service; and Fitch Ratings.
Although, the credit ratings provided by these companies are just recommendatory
opinion and will serve as reference only and is not an absolutely provide default probability to
the companies.

 Standard and Poor’s Corporation or S&P is an American financial services


corporation was founded in 1941 by Henry Varnum Poor in New York, USA. The
company uses data gathered from 128 countries using more than 1,500 credit
analysts to assess the creditworthiness to the industry. The credit ratings provided by
S&P were categorized to Investment Grade and Non-Investment Grade and scaled
from AAA to D.

 Moody’s Investors Services or Moody’s is credit rating company particularly on debt


securities established in 1909 in New York, USA. The company gathers information
from more than 130 countries, more than 4,000 non-financial corporate issues and
more than 4,000 financial institutions. The company employs more than 13,000
across the whole world. Moody’s classify the credit standing into the ratings from Aaa
to C.

 Fitch Ratings. The third credit rating agency is Fitch Ratings. It was founded in 1914
in New York, USA. The company was owned by Hearst. Hearst is a global
information and services company. Fitch provides credit opinions based on the credit
expectations based on the certain quantitative and qualitative factors that drive a
company, they assess based on the credit analysis and intensive research. They
conduct their assessment over more than 8,000 entities around the globe with 25
different currencies. Fitch same with the other rating agencies publishes its opinion
based on a certain scale of ratings to represents their opinion from AAA to D.

 There are other credit rating agencies other than the three major like DBRS and
CARE Ratings. Unlike S&P, Moody’s and Fitch, these credit rating agencies were not
located in the United States. DBRS was established in 1976 in Toronto, Canada. The
company was considered as the fourth largest ratings agency. The company observe
almost 50,000 securities worldwide. DBRS also has offices in New York, Chicago,
London, Frankfurt and Madrid in Spain. The rating follows from AAA to C as the
least. CARE Ratings started its operation in 1993 based in India. The company is
based in Mumbai with partners in Brazil, Portugal, Malaysia and South Africa. Other
than Mumbai they also have about 10 regional officers that aims to provide
information to investors to serve as guide as they enter into new investment. They
also use AAA as the best instrument to D as the least.

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