Editor’s Note: Related tickers include Morningstar, Inc. (NASDAQ:MORN), Moody’s Corporation (NYSE:MCO)
A credit rating agency (CRA) is a company that assigns credit ratings for companies, entities, governments, and state or local governments who are issuing some kind of debt obligations, like bonds that can be traded on secondary markets. A CRA often analyzes debt instruments themselves. Credit ratings involve opinions about credit risks. They refer to ability or obligations of the issuer to complete its financial responsibilities in accordance with the bonds that are issued.
Usually CRAs follow a simple, subscriber-based business model to achieve some income. This model involves releasing publications but not distributing them for free, but to receive a fee from its subscribers and provide the publications only for them.
Some of the largest credit rating agencies of the world include Morningstar, Inc. (NASDAQ:MORN), Moody’s Corporation (NYSE:MCO), S&P, and others.
In the most recent financial crisis, credit rating agencies played a major role, and some of them were heavily criticized. Delayed downgrades, too familiar relationships with companies’ management, and errors of judgement are just some of the criticisms which subjected credit rating agencies to criticism. It’s important to remember that a rating issued by a CRA must not be taken as an assurance of credit quality, but rather a relative level of credit risk, which is based on an agency’s careful, but not foolproof analysis.
Image: Morningstar, Inc. (NASDAQ:MORN)
Nonetheless, credit ratings are very important for investors, issuers of debt obligations, banks and even governments. They provide some alternatives for investing by giving an independent opinion on credit risk. At the same time they can lower costs for both borrowers and lenders.
We have compiled a list of the world’s 10 largest credit rating agencies.
Check it out on the following slides:
No.10 Morningstar Credit Ratings LLC
No.9 Kroll Bond Rating Agency
Established in 2010, Kroll Bond Rating Agency is one of the youngest companies in the field. Its main objective is to create new standards for assessing risk and to offer accurate, clear and transparent ratings in order to restore trust in credit ratings.
No.8 Rating & Investment Information
Rating & Investment Information credit rating agency was founded in 1999 in Hong Kong. Its main orientation involves evaluation of the financial and credit risks of corporations and other entities, as well as publication of information regarding these researches.
No.7 Japan Credit Rating Agency Ltd.
Founded in 1985 in Tokyo, JCR is a financial services company, providing credit ratings for Japan-based companies, and Japanese local governments. Its activity involves issuing ratings of long- and short-term debts, including medium-term note programs and asset-backed securities.
No.6 Egan-Jones
Egan-Jones was founded in 1995 in Haverford, Pennsylvania. It rates more than 1,000 high yield and high grade U.S. corporate debt issuers. It rates the overall financial condition and outlook of the issuing corporate parent.
No.5 A.M. Best
Founded in 1899, A.M. Best is probably one of the oldest credit ratings agencies in the industry. Its main purpose is to provide credit ratings for the insurance industry. It issues in-depth reports and financial strength ratings about insurance companies, and its main publication and database, Best’s Insurance Reports, provides the largest coverage of insurers in the United States, Canada, the United Kingdom and worldwide of any interactive rating organization.
No.4 DBRS
Toronto-Based DBRS has a history which doesn’t go far in the past. It was founded in 1976 and since then it provides its clients with with objective, transparent and insightful risk analysis and opinions. DBRS, also, has offices in New-York, Chicago and London.
No.3 Fitch Ratings
Fitch Ratings is headquarted in New-York and London and has about 50 offices located worldwide. Founded in 1913, Fitch Ratings was the first agency to introduce the familiar “AAA” to “D” ratings scale.
No.2 Standard & Poor’s
Standard & Poor’s rating agency has a history of over 150 years of financial and market research. It has published over a million credit ratings. They measure creditworthiness with a help of over 1,400 analysts in 23 offices around the world. Its main goal is to become a global leader among providers of credit benchmarks.
No.1 Moody’s
Moody’s Investors Service, which is specialized in providing credit ratings, is a part of Moody’s Corporation (NYSE:MCO). The corporation is also the parent company for Moody’s Analytics, which provides advisory services and research for credit and economic analysis and financial risk management. Moody’s Corporation (NYSE:MCO)’s Investors Service’s ratings cover about 115 countries, 10,000 corporateissuers, 22,000 public finance issuers, and 82,000 structured finance obligations.
