DR D.Y.

PATIL INSTITUTE OF MANAGEMENT

AND RESEARCH

Submitted by: Submitted to:

Anurag Jena Prof. Sonali Bagade
Roll no. 351
 CREDIT RATING AGENCIES
• A credit rating agency (CRA) evaluates and assesses an individual’s or a
company’s creditworthiness. That is, these agencies consider a debtor’s
income and credit lines to analyse the debtor’s ability to repay the debt or
if there is any credit risk associated.

• Securities and Exchange Board of India (SEBI) reserves the right to

authorize and regulate credit rating agencies according to SEBI
Regulations, 1999 of the SEBI Act, 1992.
HOW DO CREDIT RATING AGENCIES WORK
• Credit rating agencies analyse an organisation, individual, or entity and
assign ratings to it. These agencies have the authority to rate companies,
state governments, non-profit organisations, countries, securities, local
government bodies, and special purpose entities.
• Many factors are considered while settling with a rating such as financial
statements, type of debt, lending and borrowing history, repayment
capability, past credit repayment behaviour, and more. Each of these
factors contributes to a specified share in computing the end result, credit
score.
• The credit rating agency does not provide any decision to financial
institutions on whether an entity should get credit facility or not; rather it
provides the report and additional inputs making it easier for the lender to
analyse and an informed decision.
 TOP INTERNATIONAL CREDIT RATING
AGENCIES
1. 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.
2. 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.
3. 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 1924, 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 BankWatch and Duff &
Phelps Credit Ratings. Fitch began to develop operating subsidiaries
specializing in enterprise risk management, data services, and finance-
industry training starting in 2014 with the acquisition of a Canadian
company, Algorithmics, and the creation of Fitch Solutions and Fitch
Training.
4. DBRS
• DBRS Morningstar is a global credit rating agency (CRA) founded in 1976
(originally known as Dominion Bond Rating Service) in Toronto.
• DBRS was acquired by the global financial services
firm Morningstar.Inc. in 2019 for approximately $700 million. 
• Following the acquisition, DBRS's operations have been integrated with
Morningstar Inc.'s credit ratings business, Morningstar Credit Ratings, to
create DBRS Morningstar.
• DBRS Morningstar, which has offices in Toronto, New York, Chicago,
London, Frankfurt, Madrid and Mumbai, is the fourth-largest credit rating
agency by global market share, with approximately between 2% and 3% of
global market share.
•  DBRS comprises five affiliated operating companies – DBRS Limited;
DBRS, Inc.; DBRS Ratings Limited; DBRS Ratings GmbH; and DBRS
Ratings GmbH, Sucursal en España and Morningstar Credit Ratings, LLC.
5. EGAN – JONES
• Egan-Jones Ratings started providing ratings in 1995 for the purpose of
issuing timely, accurate ratings.

• The firm rapidly gained credibility by flagging the failures of Enron and
WorldCom, and has since established itself as a leading global provider of
credit ratings.

• Egan-Jones is a Nationally Recognized Statistical Rating Organization

(NRSRO) and is recognized by the National Association of Insurance
Commissioners (NAIC) as a Credit Rating Provider.

• Egan-Jones is also certified by the European Securities and Markets

Authority (ESMA). Studies by the Federal Reserve and prestigious
academic institutions confirm that over time, ratings from the largest
NRSROs tend to converge toward the Egan-Jones Rating.
6. A. M. BEST
• Founded in 1899, AM Best is the world’s first credit rating agency.

• It all began with the founder working out of a one-room office in New
York City and grew to become what is now the largest credit rating agency
in the world specializing in the insurance industry.

• Headquartered in the United States, the company does business in over 100
countries with regional offices in New York, London, Amsterdam, Dubai,
Hong Kong, Singapore and Mexico City.

• Our purpose is to strengthen the overall financial condition and operating

performance of the insurance industry in support of economic growth and
well-being of all stakeholders through our work in credit ratings and
information services.