1.

Definition, types and scales of credit rating

2. Write in short about the BIG 3 credit rating (Standard & Poor's, Moody's and Fitch)
3. Write briefly about the credit rating agencies of Bangladesh and their
function.

1. Definition, types and scales of credit rating

Definition:
A credit rating is an opinion of a particular credit agency regarding the ability and willingness an
entity (government, business, or individual) to fulfill its financial obligations in completeness
and within the established due dates. A credit rating also signifies an analysis of the credit risks
associated with a financial instrument or a financial entity.

Types of credit rating:

Sovereign credit ratings
A sovereign credit rating is the credit rating of a sovereign entity, such as a national
government. The sovereign credit rating indicates the risk level of the investing environment of
a country and is used by investors when looking to invest in particular jurisdictions, and also
takes into account political risk.

Short-term credit ratings

A rating expresses the likelihood that the rated party will go into default within a given time
horizon. In general, a time horizon of one year or under is considered short term credit ratings.
Nowadays, short-term ratings are commonly used.

Long-term credit ratings  

Long-Term Ratings are assigned to debt with maturities of more than one year. These debt
ratings specifically assess the likelihood of timely repayment of principal and payment of
interest over the term to maturity of such debts.

Corporate credit ratings

Credit ratings can address a corporation's financial instruments i.e. debt security such as
a bond, but also the corporations itself. Ratings are assigned by credit rating agencies, the
largest of which are Standard & Poor's, Moody's and Fitch Ratings. They use letter designations
such as A, B, C. Higher grades are intended to represent a lower probability of default.
Scales of credit rating:
Long Term Credit Ratings
(Bank/Financial Institutions/NBFIs/Corporate/Debt Instruments)
 
Rating Scale Definition
Excellent quality, offering highest safety for timely servicing of financial
AAA
obligations. Such institutions carry minimum risk
Very strong capacity for timely servicing of financial obligations
AA+,AA,AA-
offering high safety. Such institutions carry very low risk.
Strong capacity for timely servicing of financial obligations
A+,A,A-
offering adequate safety. Such institutions carry low credit risk.
Adequate capacity for timely servicing of financial obligations
offering moderate safety. The rating category denotes a moderate credit
BBB+,BBB,BBB-
risk. However changes in circumstances or economic conditions are more
likely to affect the capacity for timely servicing of financial obligations.
Inadequate safety for timely servicing of financial obligations. Such
BB+,BB,BB- institutions carry high credit risk. The entity remains more vulnerable to
adverse economic changes over time.
B+,B,B- Low safety for timely servicing of financial obligations.
CCC, CC, C Very high risk for timely servicing of financial obligations.
Entities with this rating are of the lowest category. They are either
D
in default or likely to be in default soon.

Short Term Credit Ratings 

( Bank/Financial Institutions/ NBFIs/Corporate/Debt Instruments)
 
Rating Scale Definition
Strongest capacity for timely payment of financial commitments and carry
ST-1
lowest credit risk.
Strong capacity for timely payment of financial commitments and carry
ST-2
lowest credit risk
Satisfactory capacity for timely payment of financial commitments and carry
ST-3
very low credit risk.
Moderate capacity for timely payment of financial commitments and carry
ST-4
Moderate credit risk
 Uncertain capacity for timely payment of financial commitments and carry
ST-5
high credit risk.
ST-6 Indicates actual or inherent payment default.

2.Short description about the BIG 3 credit rating:

Standard & Poor's: 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.
S&P has a total of 17 ratings it can assign to corporate and sovereign debt. Anything rated AAA
to BBB- is considered investment grade, meaning it has the ability to repay debt with no
concern. Debt rated BB+ to D is considered speculative, with an uncertain future. The lower the
rating, the more potential it has to default, with a D-rating being the worst.

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
today.
Moody's assigns countries and company debt letter grades, but in a slightly different way.
Investment grade debt goes from Aaa —the highest grade that can be assigned—to Baa3,
which indicates that the debtor is able to pay back short-term debt. Below investment grade is
speculative grade debt, which are often referred to as high-yield or junk. These grades range
from Ba1 to C, with the likelihood of repayment dropping as the letter grade goes down.

Fitch: Fitch is one of the world's top three credit rating agencies. 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, Algorithmics and the creation of Fitch Solutions and Fitch Training (now Fitch
Learning).
It operates in New York and London, basing ratings on company debt and its sensitivity to
changes like interest rates. When it comes to sovereign debt, countries request Fitch—and
other agencies—to provide an evaluation of their financial situation along with the political and
economic climates. Investment grade ratings from Fitch range from AAA to BBB. These letter
grades indicate no to low potential for default on debt. Non-investment grade ratings go from
BB to D, the latter meaning the debtor has defaulted.

3. Description about the credit rating agencies of Bangladesh

and their function.

1. Credit Rating Information and Services Ltd (CRISL): Credit Rating

Information and Services Limited (CRISL), the Premier Rating Agency of Bangladesh, has been
operating since 1995. It is a closely held public limited company operating under the license
from the Bangladesh Securities and Exchange Commission as a rating agency with the equity
participation and technical assistance of Rating Agency Malaysia Berhad, VIS Credit Rating
Company Ltd. of Pakistan, Faysal Bank Limited of Pakistan, Investment Corporation of
Bangladesh and host of celebrated professionals of the country.
CRISL, being the premier and leading credit rating agency of Bangladesh, has been operating as
the External Credit Assessment Institution (ECAI) under Basel-II Capital Adequacy Framework of
Bangladesh to assess the risk of the exposure/loans of banking clients. CRISL is operating from
its own premises at Head Office Dhaka as well as from two regional offices at Chattogram and
Khulna, the regional business hubs of the country.
CRISL provides its services with high business and ethical standard as approved by the
International Organization of Securities Commission (IOSCO), Bangladesh Securities and
Exchange Commission and Bangladesh Bank ECAI recognition Criteria.
CRISL being a Joint Venture rating agency has regional and international linkage. With its joint
venture partners, it shares global research, exchange best practices and trainings, which places
CRISL to have a global linkage on the profession. CRISL reports, researches and ratings are
available at its website for all with equal terms.
CRISL is one of the founder members of the Association of Credit Rating Agencies in Asia
(ACRAA), an association of 30 rating agencies of 13 Asian Countries. CRISL CEO served as
member of the 5 member Board of ACRAA and also worked as the Chairman of the Training
Committee. Starting its journey in 1995, CRISL has established itself as the most prestigious
rating agency of the country with the largest database on Corporate and Financial Sector of the
country.
CRISL has established itself as the most prestigious rating agency of the country having the
largest database of corporate and financial sector. During the last 24 years since inception,
CRISL has become the most admired and respected rating agency in Bangladesh. Its credibility
and success stem from its relentless pursuit of analytical rigor, and commitment to serve the
market place with independence, integrity and innovation.

2. Credit Rating Agency of Bangladesh Ltd (CRAB): Credit Rating

Agency of Bangladesh Ltd. (CRAB) is the leading credit rating agency of Bangladesh, providing
rating, grading, advisory and information services. The Company was incorporated as a public
limited company under the Registrar of Joint Stock Companies in August 2003 and it received
certificate for commencement of business in November 2003. CRAB was granted license by the
Securities & Exchange Commission (SEC) of Bangladesh for operating as a credit rating company
in February 2004. The formal launching of the company was held on 5 April 2004. CRAB has
been accredited as an External Credit Assessment Institution (ECAI) by Bangladesh Bank in
2009, which status gives it the eligibility to provide rating of bank credit exposures for risk
weighted capital adequacy calculation.
CRAB is an independent and professional company established in technical collaboration with
ICRA Ltd (Hyperlink) of India. CRAB is a leading provider of investment information and credit
rating services in Bangladesh. CRAB’s shareholders include individuals and institutions including
Investment Corporation of Bangladesh (ICB) and IDLC.
To serve to the growing market demands, CRAB has been proactive in widening its service
offerings, executing assignments including credit ratings, equity ratings, project ratings,
performance grading, advisory services and mandated studies in different industrial
sectors.CRAB offers its services under the following banners

3. National Credit Ratings Ltd: National Credit Ratings Limited (NCR) is a full
service rating company that offers a wide range of services. Incorporated as a public company,
NCR started its business with a paid up capital of TK 20.00 million. The Securities and Exchange
Commission granted the license to NCR in June 2010 under the Credit Rating Companies Rules
1996.The company is recognized by the Bangladesh Bank as an External Credit Assessment
Institution (ECAI).
their Mission is to provide high quality, independent and reliable risk profile information on
industrial and commercial enterprises in the domestic market using analytical competence,
professionalism and integrity. 
As a business information company NCR value:
•    Independence and impartiality of mind
•    Integrity and honesty
•    Professionalism and transparency
•    Confidentiality
•    Constructive self criticism
•    Self improvement and personal excellence
•    Accountability to all our stakeholders

4. Emerging Credit Rating Ltd: Emerging Credit Rating Limited (hereinafter

referred to as ECRL) was incorporated in March 2009, with the view to providing Credit Rating
Services in Bangladesh. . ECRL obtained credit rating license from Bangladesh Securities and
Exchange Commission (BSEC) in June 2010 as per Credit Rating Companies Rules 1996 and also
received Bangladesh Bank Recognition as an External Credit Assessment Institution (ECAI) in
October 2010. Our drive to deliver the promised quality has helped ECRL complete 21,617
rating assignments from the time of inception to Sep 30, 2020.
Emerging Credit Rating Limited’s team is oriented towards the continuous improvement of
processes, striving for an important role in the leadership of the business world. Every
individual in ECRL is committed to provide top most ingenious Credit Rating Services and
Comprehensive Research Services in Bangladesh.
ECRL is committed to providing Bangladesh’s credit market with independent and prospective
credit opinions, research and data. In addition to our core rating business, in the future we
hope to branch out into providing research data and analytical tools for assessing credit risk,
and publish market-leading credit opinions. The company has been built on a foundation of
local market experience, which spans throughout the Corporate sector of the country. The
company is headquartered in Dhaka, Bangladesh, with a view to expansion to other financial
districts all over the nation. ECRL has established a technical collaboration with a Malaysian
Rating Company known as Malaysian Rating Corporation Berhard (MARC), which is also
affiliated with one of the top ranking Rating companies in the world “Fitch Ratings”. Under the
technical agreement, ECRL shall adopt all the rating methodologies, definitions and symbols of
MARC, who implements the standard global practices of its affiliate.

5. ARGUS Credit Rating Services Ltd.: ARGUS Credit Rating Services Ltd.
(ACRSL) is the next-generation Credit Rating Agency of Bangladesh. Founded as a joint-venture
between global experts in credit & equity research and local sponsors with strong capital
markets track record, ACRSL received its license from the SEC in 2011. Since then Argus
completed more than 6200 rating assignments including Banks, NBFI’s, Insurance, Financial
Instruments, Large and reputed corporate entities and SME clients. Quality report, timely
delivery and extraordinary service through multinational standard relationship management.
Argus is now a prominent name in the Industry and considered as preferred choice for Credit
rating service.
Vision
Their mission:
  To earn a high reputation for integrity through the exercise of objectivity, fairness, and
independence.
  To provide a comprehensive range of services aimed at improving the efficiency of our
credit markets.
  To maintain the highest standards of quality in every rating, every product, and every
service we provide.
  To open up new frontiers in the credit markets through innovation, cross-pollination of
ideas, and technology transfer from international partners.
  To train the next-generation of local talent to global standards.
ACRSL is partnered with DP Information Group (“DP”), the premier credit rating agency of
Singapore for over 30 years. Having pioneered credit rating in Singapore, DP has played an
influential role in the development of the credit rating sector in China, Indonesia, and
Philippines. Further, DP’s parent company, the UK based Experian Group is one of the world’s
top credit reference agencies.

6. WASO Credit Rating Company (BD) Limited: WASO Credit Rating

Company (BD) Ltd. (“WCRCL”) was incorporated as a public limited company under the Office of
the Registrar of Joint Stock Companies and Firms in July of 2009. With the license from the
Securities & Exchange Commission (SEC) of Bangladesh to operate as a credit rating company,
WCRCL has officially started its journey on 15th February, 2012. It has also been recognized as
an External Credit Assessment Institution (ECAI) by Central Bank of Bangladesh in October of
2012. WCRCL is independent and transparent in its operations and eligible to rate Banks and
FIs, PSEs, Insurance, Corporate and Debt Instruments. The WCRCL team is formed with
experienced professionals and specialists from different disciplines with the highest levels of
ethics and integrity.
WASO Credit Rating Company (BD) Ltd. has executed an agreement for foreign partnership with
Financial Intelligence Services Ltd (FISL). Through this partnership with FISL, WCRCL has created
bondage with the global resources hub, thus being able to provide the best judged opinion
through rating services to the nation

7. Alpha Credit Rating Limited: As a result of the initiative of a few distinguished

and renowned professionals of Bangladesh, Alpha Credit Rating Ltd. (AlphaRating) was
incorporated on the 24th of February 2011 with support and organizational assistance from
SATCOM IT LTD., Axis Resources Ltd., Equity Care Bangladesh Ltd. and TAN Equity and
Investment Ltd.
Its founding partners are professionals, who fully understand local customs and the
complexities of the social and political structure of Bangladesh’s business environment.
AlphaRating has technical collaboration with Istanbul International Rating Services Inc
(TURKrating) which brings a wealth of experience working with national and international rating
agencies, particularly in emerging markets. It is this combination of international experience
and local insight which enables AlphaRating to offer a unique value through its rating service- a
distinct competitive advantage.
AlphaRating Licenses/ Accreditation from Regulators:
 License from Bangladesh Securities & Exchange Commission.
 Accreditation from Bangladesh Bank as ECAI.
 Accreditation from Insurance Development Regulatory Authority.

8. The Bangladesh Rating Agency Limited: The Bangladesh Rating Agency

Limited (BDRAL), a subsidiary of Dun & Bradstreet South Asia Middle East Ltd. (DBSAME), is
licensed by Bangladesh Securities and Exchange Commission (BSEC) and accredited by
Bangladesh Bank (BB), is the pioneer for rating Small and Medium Enterprises (SMEs) of
Bangladesh.
The company is strengthened by DBSAME holding the majority shares along with seven
renowned local banks and two non-bank financial institutions. The company launched SME
ratings in Bangladesh following a successful pilot phase carried out in the year 2009 under the
name Dun & Bradstreet Rating Agency Bangladesh Limited, which was later renamed as BDRAL.
Having congruence with the mentioned pragmatic approach, BDRAL SME ratings aim to address
the challenges faced by banks and other lending institutions in SME lending and took the
initiative to assist the financiers to provide a comfort level for increasing the financing in the
SME sector. BDRAL team is equipped to perform in line with its commitments towards the
growth of SMEs and all relates in Bangladesh.
Moreover, they have a Technical Collaboration Agreement (TCA) with Acuité Ratings &
Research Limited (formerly SMERA Ratings Ltd.) in India, which is also a Dun & Bradstreet
holding.
BDRAL strives for analytic excellence at all times, evaluate its rating criteria, methodologies and
procedures on a regular basis, and modify or enhance them as necessary to respond to the
needs of the Bangladesh’s markets. The company maintains a network of field analysts
throughout the country to perform the contact point verification and data collection activities.
This setup helps us to conduct surveys in specific areas or all over the country in an effective
and efficient manner. We are capable of undertaking and delivering any Economic, Business
and Investment related research. We realize that to do better business, we must have better
insight!