Uses of ratings Credit ratings are used by investors, issuers, investment banks, broker-dealers, and governments.

For investors, credit rating agencies increase the range of investment alternatives and provide independent, easy-to-use measurements of relative credit risk; this generally increases the efficiency of the market, lowering costs for both borrowers and lenders. This in turn increases the total supply of risk capital in the economy, leading to stronger growth. It also opens the capital markets to categories of borrower who might otherwise be shut out altogether: small governments, startup companies, hospitals, and universities. Ratings use by bond issuers Issuers rely on credit ratings as an independent verification of their own credit-worthiness and the resultant value of the instruments they issue. In most cases, a significant bond issuance must have at least one rating from a respected CRA for the issuance to be successful (without such a rating, the issuance may be undersubscribed or the price offered by investors too low for the issuer's purposes). Studies by the Bond Market Association note that many institutional investors now prefer that a debt issuance have at least three ratings. Issuers also use credit ratings in certain structured finance transactions. For example, a company with a very high credit rating wishing to undertake a particularly risky research project could create a legally separate entity with certain assets that would own and conduct the research work. This "special purpose entity" would then assume all of the research risk and issue its own debt securities to finance the research. The SPE's credit rating likely would be very low, and the issuer would have to pay a high rate of return on the bonds issued. However, this risk would not lower the parent company's overall credit rating because the SPE would be a legally separate entity. Conversely, a company with a low credit rating might be able to borrow on better terms if it were to form an SPE and transfer significant assets to that subsidiary and issue secured debt securities. That way, if the venture were to fail, the lenders would have recourse to the assets owned by the SPE. This would lower the interest rate the SPE would need to pay as part of the debt offering. The same issuer also may have different credit ratings for different bonds. This difference results from the bond's structure, how it is secured, and the degree to which the bond is subordinated to other debt. Many larger CRAs offer "credit rating advisory services" that essentially advise an issuer on how to structure its bond offerings and SPEs so as to achieve a given credit rating for a certain debt tranche. This creates a potential conflict of interest, of course, as the CRA may feel obligated to provide the issuer with that given rating if the issuer followed its advice on structuring the offering. Some CRAs avoid this conflict by refusing to rate debt offerings for which its advisory services were sought. Ratings use by government regulators Further information: Nationally recognized statistical rating organization Regulators use credit ratings as well, or permit ratings to be used for regulatory purposes. For example, under the Basel II agreement of the Basel Committee on Banking Supervision, banking

regulators can allow banks to use credit ratings from certain approved CRAs (called "ECAIs", or "External Credit Assessment Institutions") when calculating their net capital reserve requirements. In the United States, the Securities and Exchange Commission (SEC) permits investment banks and broker-dealers to use credit ratings from "Nationally Recognized Statistical Rating Organizations" (NRSRO) for similar purposes. The idea is that banks and other financial institutions should not need keep in reserve the same amount of capital to protect the institution against (for example) a run on the bank, if the financial institution is heavily invested in highly liquid and very "safe" securities (such as U.S. government bonds or short-term commercial paper from very stable companies). CRA ratings are also used for other regulatory purposes as well. The US SEC, for example, permits certain bond issuers to use a shortened prospectus form when issuing bonds if the issuer is older, has issued bonds before, and has a credit rating above a certain level. SEC regulations also require that money market funds (mutual funds that mimic the safety and liquidity of a bank savings deposit, but without Federal Deposit Insurance Corporation insurance) comprise only securities with a very high NRSRO rating. Likewise, insurance regulators use credit ratings to ascertain the strength of the reserves held by insurance companies. In 2008, the US SEC voted unanimously to propose amendments to its rules[2] that would remove credit ratings as one of the conditions for companies seeking to use short-form registration when registering securities for public sale. This marks the first in a series of upcoming SEC proposals in accordance with Dodd-Frank to remove references to credit ratings contained within existing Commission rules and replace them with alternative criteria. Under both Basel II and SEC regulations, not just any CRA's ratings can be used for regulatory purposes. (If this were the case, it would present a moral hazard).[citation needed] Rather, there is a vetting process of varying sorts. The Basel IIguidelines[3] (paragraph 91, et al.), for example, describe certain criteria that bank regulators should look to when permitting the ratings from a particular CRA to be used. These include "objectivity," "independence," "transparency," and others. Banking regulators from a number of jurisdictions have since issued their own discussion papers on this subject, to further define how these terms will be used in practice. (See The Committee of European Banking Supervisors Discussion Paper,[4] or the State Bank of Pakistan ECAI Criteria).[5] In the United States, since 1975, NRSRO recognition has been granted through a "No Action Letter" sent by the SEC staff. Following this approach, if a CRA (or investment bank or broker-dealer) were interested in using the ratings from a particular CRA for regulatory purposes, the SEC staff would research the market to determine whether ratings from that particular CRA are widely used and considered "reliable and credible." If the SEC staff determines that this is the case, it sends a letter to the CRA indicating that if a regulated entity were to rely on the CRA's ratings, the SEC staff will not recommend enforcement action against that entity. These "No Action" letters are made public and can be relied upon by other regulated entities, not just the entity making the original request. The SEC has since sought to further define the criteria it uses when making this assessment, and in March 2005 published a proposed regulation to this effect. On September 29, 2006, US President George W. Bush signed into law the Credit Rating Reform Act of 2006.[6] This law requires the US Securities and Exchange Commission to clarify how NRSRO

recognition is granted, eliminates the "No Action Letter" approach and makes NRSRO recognition a Commission (rather than SEC staff) decision, and requires NRSROs to register with, and be regulated by, the SEC. S & P protested the Act on the grounds that it is an unconstitutional violation of freedom of speech.[6] In the Summer of 2007 the SEC issued regulations implementing the act, requiring rating agencies to have policies to prevent misuse of nonpublic information, disclosure of conflicts of interest and prohibitions against "unfair practices".[7] Recognizing CRAs' role in capital formation, some governments have attempted to jump-start their domestic rating-agency businesses with various kinds of regulatory relief or encouragement. This may, however, be counterproductive, if it dulls the market mechanism by which agencies compete, subsidizing less-capable agencies and penalizing agencies that devote resources to higher-quality opinions. Ratings use in structured finance Credit rating agencies may also play a key role in structured financial transactions. Unlike a "typical" loan or bond issuance, where a borrower offers to pay a certain return on a loan, structured financial transactions may be viewed as either a series of loans with different characteristics, or else a number of small loans of a similar type packaged together into a series of "buckets" (with the "buckets" or different loans called "tranches"). Credit ratings often determine the interest rate or price ascribed to a particular tranche, based on the quality of loans or quality of assets contained within that grouping. Companies involved in structured financing arrangements often consult with credit rating agencies to help them determine how to structure the individual tranches so that each receives a desired credit rating. For example, a firm may wish to borrow a large sum of money by issuing debt securities. However, the amount is so large that the return investors may demand on a single issuance would be prohibitive. Instead, it decides to issue three separate bonds, with three separate credit ratingsA (medium low risk), BBB (medium risk), and BB (speculative) (using Standard & Poor's rating system). The firm expects that the effective interest rate it pays on the A-rated bonds will be much less than the rate it must pay on the BB-rated bonds, but that, overall, the amount it must pay for the total capital it raises will be less than it would pay if the entire amount were raised from a single bond offering. As this transaction is devised, the firm may consult with a credit rating agency to see how it must structure each tranchein other words, what types of assets must be used to secure the debt in each tranchein order for that tranche to receive the desired rating when it is issued. There has been criticism in the wake of large losses in the collateralized debt obligation (CDO) market that occurred despite being assigned top ratings by the CRAs. For instance, losses on $340.7 million worth of CDOs issued by Credit Suisse Group added up to about $125 million, despite being rated AAA or Aaa by Standard & Poor's, Moody's Investors Service and Fitch Group.[8] The rating agencies respond that their advice constitutes only a "point in time" analysis, that they make clear that they never promise or guarantee a certain rating to a tranche, and that they also make clear that any change in circumstance regarding the risk factors of a particular tranche will

invalidate their analysis and result in a different credit rating. In addition, some CRAs do not rate bond issuances upon which they have offered such advice. Complicating matters, particularly where structured finance transactions are concerned, the rating agencies state that their ratings are opinions (and as such, are protected free speech, granted to them by the "personhood" of corporations) regarding the likelihood that a given debt security will fail to be serviced over a given period of time, and not an opinion on the volatility of that security and certainly not the wisdom of investing in that security. In the past, most highly rated (AAA or Aaa) debt securities were characterized by low volatility and high liquidityin other words, the price of a highly rated bond did not fluctuate greatly day-to-day, and sellers of such securities could easily find buyers. However, structured transactions that involve the bundling of hundreds or thousands of similar (and similarly rated) securities tend to concentrate similar risk in such a way that even a slight change on a chance of default can have an enormous effect on the price of the bundled security. This means that even though a rating agency could be correct in its opinion that the chance of default of a structured product is very low, even a slight change in the market's perception of the risk of that product can have a disproportionate effect on the product's market price, with the result that an ostensibly AAA or Aaa-rated security can collapse in price even without there being any default (or significant chance of default). This possibility raises significant regulatory issues because the use of ratings in securities and banking regulation (as noted above) assumes that high ratings correspond with low volatility and high liquidity. Criticism Credit rating agencies have been subject to the following criticisms:

Credit rating agencies do not downgrade companies promptly enough. For example, Enron's rating remained at investment grade four days before the company went bankrupt, despite the fact that credit rating agencies had been aware of the company's problems for months.[9][10] Or, for example, Moody's gave Freddie Mac preferred stock the top rating until Warren Buffett talked about Freddie on CNBC and on the next day Moody's downgraded Freddie to one tick above junk bonds.[11] Some empirical studies have documented that yield spreads of corporate bonds start to expand as credit quality deteriorates but before a rating downgrade, implying that the market often leads a downgrade and questioning the informational value of credit ratings.[12] This has led to suggestions that, rather than rely on CRA ratings in financial regulation, financial regulators should instead require banks, brokerdealers and insurance firms (among others) to use credit spreads when calculating the risk in their portfolio. Large corporate rating agencies have been criticized for having too familiar a relationship with company management, possibly opening themselves to undue influence or the vulnerability of being misled.[13] These agencies meet frequently in person with the management of many companies, and advise on actions the company should take to maintain a certain rating. Furthermore, because information about ratings changes from the larger CRAs can spread so quickly (by word of mouth, email, etc.), the larger CRAs charge debt issuers, rather than investors, for their ratings. This has led to accusations that these

CRAs are plagued by conflicts of interest that might inhibit them from providing accurate and honest ratings. At the same time, more generally, the largest agencies (Moody's and Standard & Poor's) are often seen as promoting a narrow-minded focus on credit ratings, possibly at the expense of employees, the environment, or long-term research and development.[citation needed] These accusations are not entirely consistent: on one hand, the larger CRAs are accused of being too cozy with the companies they rate, and on the other hand they are accused of being too focused on a company's "bottom line" and unwilling to listen to a company's explanations for its actions.[citation needed].

While often accused of being too close to company management of their existing clients, CRAs have also been accused of engaging in heavy-handed "blackmail" tactics in order to solicit business from new clients, and lowering ratings for those firms . For instance, Moody's published an "unsolicited" rating of Hannover Re, with a subsequent letter to the insurance firm indicating that "it looked forward to the day Hannover would be willing to pay". When Hannover management refused, Moody's continued to give Hannover Re ratings, which were downgraded over successive years, all while making payment requests that the insurer rebuffed. In 2004, Moody's cut Hannover's debt to junk status, and even though the insurer's other rating agencies gave it strong marks, shareholders were shocked by the downgrade and Hannover lost $175 million USD in market capitalization.[14] The lowering of a credit score by a CRA can create a vicious cycle and self-fulfilling prophecy, as not only interest rates for that company would go up, but other contracts with financial institutions may be affected adversely, causing an increase in expenses and ensuing decrease in credit worthiness. In some cases, large loans to companies contain a clause that makes the loan due in full if the companies' credit rating is lowered beyond a certain point (usually a "speculative" or "junk bond" rating). The purpose of these "ratings triggers" is to ensure that the bank is able to lay claim to a weak company's assets before the company declares bankruptcy and a receiver is appointed to divide up the claims against the company. The effect of such ratings triggers, however, can be devastating: under a worstcase scenario, once the company's debt is downgraded by a CRA, the company's loans become due in full; since the troubled company likely is incapable of paying all of these loans in full at once, it is forced into bankruptcy (a so-called "death spiral"). These rating triggers were instrumental in the collapse of Enron. Since that time, major agencies have put extra effort into detecting these triggers and discouraging their use, and the U.S. Securities and Exchange Commission requires that public companies in the United States disclose their existence. Agencies are sometimes accused of being oligopolists,[15] because barriers to market entry are high and rating agency business is itself reputation-based (and the finance industry pays little attention to a rating that is not widely recognized). Of the large agencies, only Moody's is a separate, publicly held corporation that discloses its financial results without dilution by non-ratings businesses, and its high profit margins (which at times have been greater than 50 percent of gross margin) can be construed as consistent with the type of returns one might expect in an industry which has high barriers to entry.[16]

Credit Rating Agencies have made errors of judgment in rating structured products, particularly in assigning AAA ratings to structured debt, which in a large number of cases has subsequently been downgraded or defaulted. The actual method by which Moody's rates CDOs has also come under scrutiny. If default models are biased to include arbitrary default data and "Ratings Factors are biased low compared to the true level of expected defaults, the Moodys [method] will not generate an appropriate level of average defaults in its default distribution process. As a result, the perceived default probability of rated tranches from a high yield CDO will be incorrectly biased downward, providing a false sense of confidence to rating agencies and investors."[17] Little has been done by rating agencies to address these shortcomings indicating a lack of incentive for quality ratings of credit in the modern CRA industry. This has led to problems for several banks whose capital requirements depend on the rating of the structured assets they hold, as well as large losses in the banking industry.[18][19][20] AAA rated mortgage securities trading at only 80 cents on the dollar, implying a greater than 20% chance of default, and 8.9% of AAA rated structured CDOs are being considered for downgrade by Fitch, which expects most to downgrade to an average of BBB to BB-. These levels of reassessment are surprising for AAA rated bonds, which have the same rating class as US government bonds.[21][22] Most rating agencies do not draw a distinction between AAA on structured finance and AAA on corporate or government bonds (though their ratings releases typically describe the type of security being rated). Many banks, such as AIG, made the mistake of not holding enough capital in reserve in the event of downgrades to their CDO portfolio. The structure of the Basel II agreements meant that CDOs capital requirement rose 'exponentially'. This made CDO portfolios vulnerable to multiple downgrades, essentially precipitating a large margin call. For example under Basel II, a AAA rated securitization requires capital allocation of only 0.6%, a BBB requires 4.8%, a BB requires 34%, whilst a BB(-) securitization requires a 52% allocation. For a number of reasons (frequently having to do with inadequate staff expertise and the costs that risk management programs entail), many institutional investors relied solely on the ratings agencies rather than conducting their own analysis of the risks these instruments posed. (As an example of the complexity involved in analyzing some CDOs, the Aquarius CDO structure has 51 issues behind the cash CDO component of the structure and another 129 issues that serve as reference entities for $1.4 billion in CDS contracts for a total of 180. In a sample of just 40 of these, they had on average 6500 loans at origination. Projecting that number to all 180 issues implies that the Aquarius CDO has exposure to about 1.2 million loans.) Pimco founder William Gross urged investors to ignore rating agency judgments, describing the agencies as "an idiot savant with a full command of the mathematics, but no idea of how to apply them."[23] Many of the structured financial products that they were responsible for rating, consisted of lower quality 'BBB' rated loans, but were, when pooled together into CDOs, assigned an AAA rating. The strength of the CDO was not wholly dependent on the strength of the underlying loans, but in fact the structure assigned to the CDO in question. CDOs are usually paid out in a 'waterfall' style fashion, where income received gets paid out first to the highest tranches, with the remaining income flowing down to the lower quality tranches i.e. <AAA. CDOs were typically structured such that AAA tranches which were to receive first lien (claim) on the BBB rated loans cash flows, and losses would trickle up from the lowest quality tranches

first. Cash flow was well insulated even against heavy levels of home owner defaults. Credit rating agencies only accounted for a ~5% decline in national housing prices at worst, allowing for a confidence in rating the many of these CDOs that had poor underlying loan qualities as AAA. It did not help that an incestuous relationship between financial institutions and the credit agencies developed such that, banks began to leverage the credit ratings off one another and 'shop' around amongst the three big credit agencies until they found the best ratings for their CDOs. Often they would add and remove loans of various quality until they met the minimum standards for a desired rating, usually, AAA rating. Often the fees on such ratings were $300,000 - $500,000, but ran up to $1 million.[24]

It has also been suggested that the credit agencies are conflicted in assigning sovereign credit ratings since they have a political incentive to show they do not need stricter regulation by being overly critical in their assessment of governments they regulate.[25]

As part of the Sarbanes-Oxley Act of 2002, Congress ordered the U.S. SEC to develop a report, titled "Report on the Role and Function of Credit Rating Agencies in the Operation of the Securities Markets"[26] detailing how credit ratings are used in U.S. regulation and the policy issues this use raises. Partly as a result of this report, in June 2003, the SEC published a "concept release" called "Rating Agencies and the Use of Credit Ratings under the Federal Securities Laws"[27] that sought public comment on many of the issues raised in its report. Public comments on this concept release have also been published on the SEC's website. In December 2004, the International Organization of Securities Commissions (IOSCO) published a Code of Conduct[28] for CRAs that, among other things, is designed to address the types of conflicts of interest that CRAs face. All of the major CRAs have agreed to sign on to this Code of Conduct and it has been praised by regulators ranging from the European Commission to the U.S. Securities and Exchange Commission.

Attempts to regulate more strictly credit rating agencies in the wake of the European sovereign debt crisis have been rather unsuccessful. Some European financial regulation experts have argued that the hastily drafted, unevenly transposed in national law, and poorly enforced EU rule on rating agencies (Rglement CE n 1060/2009) has had little effect on the way financial analysts and economists interpret data or potential conflict of interests created by the complex contractual arrangements between credit rating agencies and their clients" [29]

Oligopoly produced by regulation According to professor Frank Partnoy, the regulation of CRAs by the Securities and Exchange Commission (SEC) and the FED has eliminated competition between CRAs and practically forced market participants to use the services of the three big agencies, Standard and Poor's, Moody's and Fitch.[30] SEC Commissioner Kathleen Casey has said that these CRAs have acted much like Fannie Mae, Freddie Mac and other companies that dominate the market because of government actions. When the CRAs gave ratings that were "catastrophically misleading, the large rating agencies enjoyed their most profitable years ever during the past decade."[30]

To solve this problem, Ms. Casey proposed to remove the NRSRO rules completely.[30] Also professor Lawrence White (NYU) has made the same proposition.[31] Professor Frank Partnoy suggests that the regulators should trust in credit risk swap markets instead of NRSROs.[30] The CRAs have made competing suggestions that would, instead, add further regulations that would make market entrance even more expensive than it is now.[31] Regulatory reliance on credit ratings Think-tanks such as the World Pensions Council have argued that European powers such as France and Germany pushed dogmatically and naively for the adoption of the so-called Basel II recommendations, adopted in 2005, transposed in European Union law through the Capital Requirements Directive (CRD), effective since 2008. In essence, they forced European banks, and, more importantly, the European Central Bank itself when gauging the solvency of financial institutions, to rely more than ever on standardized assessments of credit risk marketed by two private US agencies- Moodys and S&P, thus using public policy and ultimately taxpayers money to strengthen an anti-competitive duopolistic industry.[32] List of credit rating agencies For more information, see Bond credit rating. Agencies that assign credit ratings for corporations include:

A. M. Best (U.S.) Baycorp Advantage (Australia) Bulgarian Credit Rating Agency (Bulgaria, European Union) Capital Intelligence (Cyprus)[33] Capital Standards Rating (Kuwait)[34] Credo line (Ukraine) CreditSiren[35](European Union) Credit Rating Information and Services Limited(CRISL),[36](Bangladesh) Dagong Global (People's Republic of China) Dominion Bond Rating Service (Canada) Egan-Jones Rating Company (U.S.) First Afghan Credit Risk Ratings (Afghanistan)FACRR First Report, (UK) Fitch Ratings (Dual-headquartered U.S./UK), 80% of which is owned by FIMALAC, a French firm.

Global Credit Ratings Co. (Africa) CRISIL (India) CARE (India) ICRA Limited (India) Japan Credit Rating Agency, Ltd. (Japan)[37] Kroll Bond Rating Agency (U.S.) Moody's Investors Service (U.S.) Muros Ratings[38] (Russia alternative rating agency) Rapid Ratings International (U.S.) Standard & Poor's (U.S.) Weiss Ratings (U.S.)

The Big Three Main article: Big Three (credit rating agencies) The Big Three credit rating agencies are Standard & Poor's, Moody's Investor Service, and Fitch Ratings.[39] Moody's and S&P each control about 40 percent of the market. Third-ranked Fitch Ratings, which has about a 14 percent market share, sometimes is used as an alternative to one of the other majors.[40] CRA business models Most credit rating agencies follow one of two business models. Originally, all CRAs relied on a "subscriber-based" business model where the CRA would not distribute the ratings for free but would instead only provide the ratings to subscribers to the CRA's publications. Subscription fees would provide the bulk of the CRA's income. Today, most smaller CRAs still rely on this business model, which proponents believe allows the CRA to publish ratings that are less likely to be tinged by certain types of conflicts of interest. By contrast, most large and medium-sized CRAs (including Moody's, S&P, Fitch, Japan Credit Ratings, R&I, A.M. Best and others) today rely on an "issuer-pays" business model in which most of the CRA's revenue comes from fees paid by the issuers themselves. Under this business model, while subscribers to the CRA's services are still provided with more detailed reports analyzing an issuer, these services are a minor source of income and most ratings are provided to the public for free. Proponents of this model argue that if the CRA relied only on subscriptions for income, the vast majority of bonds would go unrated since subscriber interest is low for all but the largest issuances. These proponents also argue that while they face a clear conflict of interest vis-a-vis the issuers they rate (as described above), the subscriber-based model also presents conflicts of interest, since a single subscriber may provide a large portion of a CRA's revenue and the CRA may feel obligated to publish ratings that support that subscriber's investment decisions.

Open Source model In October 2011, a new collaboration based business model called Wikirating was developed by Austrian mathematician Dorian Cred. The online community credit rating platform aims to provide a transparent source of credit rating information, reviewed by a worldwide commnunity.[41]

Ratings
Standard & Poor's

World countries by Standard & Poor's Foreign Rating in April 2012:[1][2] Lighter blue Green - AAA Purple A Turquoise BB Dark blue AA Red - B BBB Grey - not rated For S&P, a bond is considered investment grade if its credit rating is BBB- or higher. Bonds rated BB+ and below are considered to be speculative grade, sometimes also referred to as "junk" bonds.[3] Country Luxembourg Liechtenstein Netherlands Norway Hong Kong Germany Finland Denmark Canada Australia Rating Outlook Date Ref. [4][5] AAA Negative 2012-01-13 AAA Stable 2011-11-29 [4][5] AAA Stable 2012-01-13 [4][5] AAA Stable 2011-11-29 [4][5] AAA Stable 2011-11-29 [4][5] AAA Stable 2012-2-20 [4][5] AAA Stable 2012-2-20 [4][5] AAA Stable 2012-2-20 [4][5] AAA Stable 2012-2-20 [4][5] AAA Stable 2012-2-20 [4][5]

Country United Kingdom Singapore Sweden Switzerland United States Austria France Isle of Man Guernsey Qatar New Zealand Belgium Kuwait Abu Dhabi, UAE Estonia Japan China Czech Republic Bermuda Saudi Arabia Taiwan Slovenia Chile Israel Andorra Oman Slovakia Ras Al Khaimah, UAE South Korea Trinidad and Tobago Poland Malaysia Malta Curacao Botswana Aruba Ireland Italy Spain

Rating Outlook Date Ref. [4][5] AAA Stable 2012-04-13 AAA Stable 2011-11-29 [4][5] AAA Stable 2011-11-29 [4][5] AAA Stable AA+ AA+ AA+ AA+ AA+ AA AA AA AA AA AAAAAAAAAAAAAAA+ A+ A+ A A A A A A AAAAAABBB+ BBB+ BBB+ 2011-11-29 [4][5] Negative 2011-11-29 [4][5] Negative 2012-2-20 [4][5] Negative 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Negative 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2012-2-20 [4][5] Negative 2012-2-20 [4][5] Negative 2011-11-29 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Negative 2012-01-13 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Negative 2012-2-20 [4][5] Negative 2011-11-29 [4][5] Stable 2012-01-13 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Negative 2012-01-13 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Negative 2012-01-13 [4][5] Negative 2012-01-13 [4][5] Negative 2012-04-26 [4][5]

Country Kazakhstan South Africa Thailand Peru Mexico Lithuania Bahrain Bulgaria Brazil Bahamas Russia Morocco Montserrat Turkey Tunisia Panama Barbados India Croatia Colombia Iceland Azerbaijan Indonesia Uruguay Hungary Cyprus Romania Latvia Philippines Macedonia Guatemala Montenegro Jordan Portugal Costa Rica Serbia Paraguay Mongolia Vietnam

Rating Outlook Date Ref. [4][5] BBB+ Stable 2011-11-29 BBB+ Stable 2011-11-29 [4][5] BBB+ Stable 2011-11-29 [4][5] BBB Stable 2011-11-29 [4][5] BBB Stable 2011-11-29 [4][5] BBB Stable 2011-11-29 [4][5] BBB Negative 2012-2-20 [4][5] BBB Stable 2012-2-20 [4][5] BBB Stable 2012-2-20 [4][5] BBB Stable 2012-2-20 [4][5] BBB Stable 2011-11-29 [4][5] BBB- Stable 2011-11-29 [4][5] BBB- Stable 2011-11-29 [4][5] BBB- Positive 2011-11-29 [4][5] BBB- Negative 2011-11-29 [4][5] BBB- Positive 2011-11-29 [4][5] BBB- Negative 2012-2-20 [4][5] BBB- Negative 2012-04-25 [4][5][6] BBB- Stable 2012-2-20 [4][5] BBB- Stable 2012-2-20 [4][5] BBB- Stable 2011-11-29 [4][5] BBB- Positive 2012-2-20 [4][5] BBB- Positive 2011-11-29 [4][5] BBB- Stable 2012-04-03 [4][5] BB+ Negative 2011-12-21 [4][5] BB+ Negative 2012-2-20 [4][5] BB+ Stable 2011-11-29 [4][5] APositive 2011-11-29 [4][5] BB Stable 2011-11-29 [4][5] BB Stable 2011-11-29 [4][5] BB Negative 2011-11-29 [4][5] BB Negative 2011-11-29 [4][5] BB Negative 2011-11-29 [4][5] BB Negative 2012-01-13 [4][5] BB Stable 2012-2-20 [4][5] BB Stable 2011-11-29 [4][5] BB- Stable 2011-11-29 [4][5] BB- Stable 2011-11-29 [4][5] BB- Negative 2011-11-29 [4][5]

Country El Salvador Gabon Georgia Angola Bangladesh Suriname Cook Islands Bolivia

Rating Outlook Date BB- Stable 2012-2-20 BB- Stable 2012-2-20 BBBBBBBBB+ BB-

Ref.
[4][5] [4][5]

Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Negative 2012-2-20 [4][5] Positive 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Positive 2011-11-29 [4][5] Negative 2011-11-29 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Negative 2012-2-20 [4][5] Negative 2012-2-20 [4][5] Positive 2012-06-08 [4][5] Stable 2011-11-29 [4][5] Negative 2012-4-20 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Stable 2012-2-20 [4][5] Stable 2012-2-20 [4][5] Stable 2011-11-29 [4][5] Positive 2012-2-20 [4][5] Negative 2012-2-20 [4][5] Negative 2011-11-29 [4][5] Stable 2011-11-29 [4][5] Negative 2012-2-20 [4][5] 2012-03-13 [4][5]

B+ Papua New Guinea B+ Mozambique Nigeria B+ Sri Lanka B+ B+ Senegal Cape Verde B+ Dominican Republic B+ B+ Kenya B+ Zambia B+ Ukraine B+ Albania B+ Venezuela B+ Uganda B Egypt Bosnia and Herzegovina B Honduras B+ B+ Ghana Argentina B B Burkina Faso B Cameroon B Cambodia B Lebanon Fiji B B Benin BPakistan BEcuador Belarus BJamaica BGrenada BCCC+ Belize SD Greece

Fitch
For Fitch, a bond is considered investment grade if its credit rating is BBB- or higher. Bonds rated BB+ and below are considered to be speculative grade, sometimes also referred to as "junk" bonds.[7] Country Finland France Germany Austria Australia Canada Denmark Netherlands Norway Luxembourg Sweden Singapore Switzerland United States United Kingdom Hong Kong Bermuda Belgium Abu Dhabi, UAE New Zealand Kuwait Saudi Arabia Czech Republic China Chile Estonia Japan Slovakia South Korea Malta Taiwan Spain San Marino Israel Rating Outlook AAA Stable AAA Negative AAA Stable AAA Stable AAA Stable AAA Stable AAA Stable AAA AAA AAA AAA AAA AAA AAA AA+ AA+ AA AA AA AA AAA+ A+ A+ A+ A+ A+ A+ A+ A+ BBB A A Stable Stable Stable Stable Stable Negative Negative Stable Stable Negative Stable Stable Stable Stable Positive Stable Stable Stable Negative Stable Positive Stable Stable Negative Negative Stable Date Ref. [8] 2011-11-21 2011-12-16 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-29 [9] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2012-03-15 [8] 2011-11-21 [8] 2011-11-21 [8] 2012-01-27 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2012-05-22 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2012-06-07 [8] 2011-11-21 [8] 2011-11-21 [8]

AAA Stable

Country Rating Outlook Date Ref. [8] Ras Al Khaimah, UAE A Stable 2011-11-21 Slovenia A Negative 2012-01-27 [8] Malaysia AStable 2011-11-21 [8] Poland AStable 2011-11-21 [8] ANegative 2012-01-27 [8] Italy Ireland BBB+ Negative 2011-11-21 [8] BBB+ Stable 2011-11-21 [8] South Africa BBB Stable 2011-11-21 [8] Aruba BBB Stable 2011-11-21 [8] Brazil BBB Positive 2011-11-21 [8] Russia Bahrain BBB Stable 2011-11-21 [8] Kazakhstan BBB Positive 2011-11-21 [8] Lithuania BBB Positive 2011-11-21 [8] BBB Stable 2011-11-21 [8] Peru BBB Stable 2011-11-21 [8] Panama BBB Stable 2011-11-21 [8] Thailand Mexico BBB Stable 2011-11-21 [8] BBB- Positive 2011-11-21 [8] Namibia BBB- Stable 2011-11-21 [8] Morocco Latvia BBB- Positive 2011-11-21 [8] BBB- Stable 2011-11-21 [8] Romania Croatia BBB- Negative 2011-11-21 [8] BBB- Stable 2011-11-21 [8] Colombia Bulgaria BBB- Positive 2011-11-21 [8] Azerbaijan BBB- Positive 2011-11-21 [8] BBB- Negative 2012-06-18 [8] India BBB- Negative 2011-11-21 [8] Tunisia BBB- Stable 2011-12-15 [8] Indonesia Philippines BBB- Stable 2011-11-21 [8] BB+ Positive 2011-11-21 [8] Turkey Macedonia BB+ Stable 2011-11-21 [8] Hungary BB+ Negative 2012-01-06 [8] BB+ Stable 2011-11-21 [8] Iceland Guatemala BB+ Stable 2011-11-21 [8] Costa Rica BB+ Stable 2011-11-21 [8] Cyprus BB+ Negative 2012-01-21 [8] BB+ Watch Negative 2011-11-21 [8][10] Portugal BB Negative 2011-11-21 [8] Egypt El Salvador BB Stable 2011-11-21 [8]

Country Uruguay Serbia Nigeria Lesotho Sri Lanka Gabon Angola Armenia Bolivia Cape Verde Mongolia Ghana Georgia Kenya Vietnam Venezuela Suriname Zambia Ukraine Uganda Seychelles Rwanda Mozambique Lebanon Dominican Republic Argentina Benin Cameroon Jamaica Ecuador Greece

Rating Outlook BB Positive BB- Stable BB- Stable BB- Negative BB- Stable BB- Stable BBBBB+ B+ B+ B+ B+ B+ B+ B+ B+ B+ B B B B B B B B B B BBCCC Stable Stable Stable Stable Stable Stable Positive Stable Stable Negative Stable Stable Stable Stable Stable Stable Stable Stable Positive Stable Stable Stable Stable Stable Stable

Date Ref. [8] 2011-11-21 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2011-11-21 [8] 2012-05-17 [8]

Moody's
For Moody's, a bond is considered investment grade if its credit rating is Baa3 or higher. Bonds rated Ba1 and below are considered to be speculative grade, sometimes also referred to as "junk" bonds.[11] Country Isle of Man Rating Outlook Aaa Stable Date Ref. [12] 2011-08-05

Country Denmark France Finland Germany Australia Austria Canada Netherlands New Zealand Norway Luxembourg Singapore Sweden Switzerland United Kingdom United States Hong Kong United Arab Emirates Bermuda Kuwait Qatar Japan Belgium Chile Cayman Islands China Macao Saudi Arabia Taiwan South Korea Oman Malta Israel Estonia Czech Republic Botswana Poland Slovakia Slovenia

Rating Outlook Aaa Stable Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aaa Aa1 Aa2 Aa2 Aa2 Aa2 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 A1 A1 A1 A1 A1 A1 A2 A2 A2 A2 Negative Stable Stable Stable Negative Stable Stable Stable Stable Stable Stable Stable Stable

Date Ref. [12] 2011-08-05 2012-02-13 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2012-02-13 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12]

Negative Watch 2012-02-13 [12] Negative 2011-08-05 [12] Positive 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-23 [12] Negative 2011-12-16 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Positive 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Negative 2011-08-05 [12] Stable 2011-08-05 [12] Negative 2012-02-13 [12] Negative 2012-02-13 [12]

Country South Africa Malaysia Bahamas Italy Lithuania Mexico Bahrain Trinidad and Tobago Russia Thailand Mauritius Kazakhstan Brazil Bulgaria Latvia Panama Peru Croatia Costa Rica Colombia Azerbaijan Barbados India Iceland Indonesia Spain Romania Tunisia Uruguay Turkey Morocco Ireland Guatemala Hungary Philippines Armenia El Salvador Jordan Portugal

Rating Outlook A3 Stable A3 Stable A3 Stable A3 Negative Baa1 Stable Baa1 Stable Baa1 Negative Baa1 Stable Baa1 Stable Baa1 Stable Baa2 Stable Baa2 Stable Baa2 Positive Baa2 Stable Baa3 Positive Baa3 Positive Baa3 Positive Baa3 Stable Baa3 Stable Baa3 Stable Baa3 Positive Baa3 Negative Baa3 Stable Baa3 Negative Baa3 Stable Baa3 Negative Baa3 Stable Baa3 Negative Ba1 Stable Ba1 Positive Ba1 Stable Ba1 Negative Ba1 Stable Ba1 Negative Ba2 Stable Ba2 Negative Ba2 Stable Ba2 Negative Ba3 Negative

Date Ref. [12] 2011-08-05 2011-08-05 [12] 2011-08-05 [12] 2012-02-13 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2012-04-19 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2012-01-18 [12] 2012-06-13 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2012-06-20 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-11-24 [12][15] 2011-08-05 [12] 2011-11-21 [12] 2011-08-05 [12] 2011-08-05 [12] 2012-02-13 [12]

Country Montenegro Bolivia Angola Bangladesh Georgia Cyprus Dominican Republic Egypt Fiji Albania

Rating Outlook Ba3 Stable Ba3 Positive Ba3 Stable Ba3 Stable Ba3 Stable Ba3 Negative B1 Stable B1 Negative B1 Negative B1 Stable Stable

Date Ref. [12] 2011-08-05 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12] 2012-06-13 [12][14] 2011-08-05 [12] 2011-10-27 [12] 2011-08-05 [12] 2011-08-05 [12] 2011-08-05 [12]

B1 Papua New Guinea Paraguay B1 B1 Lebanon Mongolia B1 St. Vincent & the Grenadines B1 Sri Lanka B1 B1 Senegal B1 Suriname B1 Vietnam B2 Ukraine B2 Cambodia Honduras B2 B2 Venezuela B3 Pakistan Jamaica B3 Moldova B3 Nicaragua B3 Bosnia and Herzegovina B3 B3 Belize Belarus B3 Argentina B3 Cuba Caa1 Caa2 Ecuador C Greece

Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Positive 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Negative 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Negative 2012-04-03 [12][13] Stable 2011-08-05 [12] Watch Negative 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] Stable 2011-08-05 [12] 2012-03-02 [12]

Dagong
Dagong is a Beijing-based rating agency and the only agency outside the "Big Three credit rating agencies" to have gained some recognition from the western financial press.[16]

Country Luxembourg Hong Kong China Finland Norway Singapore Sweden Switzerland Australia New Zealand Denmark Austria Canada Germany Macao Netherlands Saudi Arabia Cayman Islands Chile Japan South Korea Taiwan Qatar United Kingdom Belgium Czech Republic France Malaysia Estonia Russia South Africa Spain United States Poland Brazil Israel Peru Morocco Tunisia

Rating Outlook Date Ref. AAA Stable 2011-07-11 [17] AAA Stable 2010-10-20 [17] AAA Stable 2010-07-11 [17] AAA Negative 2010-12-06 [17] AAA Stable 2010-07-11 [17] AAA Stable 2010-07-11 [17] AAA Stable 2011-06-11 [17] AAA Stable AAA Stable AA+ Stable AA+ Stable AA+ AA+ AA+ AA+ AA+ AA AAAAAAAAAAAAA+ A+ A+ A+ A+ A A A A A AAABBB+ BBB+ BBB 2010-07-11 [17] 2010-07-11 [17] 2010-07-11 [17] 2011-11-01 [17]

Stable 2010-10-20 [17] Stable 2010-07-11 [17] Stable 2011-07-01 [17] Stable 2010-10-20 [17] Stable 2011-06-02 [17] Stable 2011-07-01 [17] Stable 2012-02-21 [17] Stable 2011-05-31 [17] Stable 2011-06-02 [17] Stable 2010-07-11 [17] Stable 2010-10-20 [17] Stable 2012-01-11 [17] Negative 2011-05-27 [17] Negative 2010-07-11 [18] Stable 2011-11-21 [17] Negative 2011-12-08 [17] Stable 2011-06-21 [17] Stable 2010-07-11 [17] Stable 2010-07-11 [17] Negative 2011-08-29 [17] Negative 2011-06-21 [17] Negative 2011-08-03 [20] Negative 2011-08-02 [19] Stable 2010-07-11 [17] Stable 2010-07-11 [17] Stable 2010-10-20 [17] Negative 2011-10-10 [17] Negative 2011-12-16 [17]

Country Rating Outlook Date Ref. BBB Stable 2010-07-11 [17] Thailand Ireland BBB Stable 2010-12-06 [17] Mexico BBB Stable 2010-07-11 [17] BBB Negative 2011-12-07 [17] Italy BBB Stable 2011-07-11 [17] India United Arab Emirates BBB- Stable 2010-08-09 [17] BBB- Stable 2012-01-10 [17] Algeria Lithuania BBB- Stable 2011-03-16 [17] Kazakhstan BBB- Stable 2010-07-11 [17] Hungary BBB- Negative 2011-03-11 [17] BBB- Stable 2010-07-11 [17] Indonesia BB+ Positive 2010-12-06 [17] Uruguay Nigeria BB+ Stable 2010-07-11 [17] BB+ Negative 2011-11-24 [17] Portugal BB+ Stable 2010-07-11 [17] Venezuela BB Negative 2010-07-11 [17] Romania Latvia BB Stable 2010-10-20 [17] BB- Stable 2011-09-07 [17] Iceland BB- Negative 2011-11-22 [17] Egypt BB- Stable 2010-07-11 [17] Turkey Sri Lanka B+ Stable 2011-03-16 [17] Mongolia B+ Stable 2011-06-28 [17] Paraguay B+ Negative 2012-01-04 [17] Philippines B+ Stable 2010-07-11 [17] B+ Negative 2011-08-31 [17] Vietnam Argentina B Stable 2010-07-11 [17] B Stable 2010-12-06 [17] Kenya BStable 2010-07-11 [17] Ukraine BStable 2010-10-09 [17] Ecuador CCC Stable 2011-09-08 [17] Pakistan CCC Stable 2011-03-16 [17] Madagascar Ethiopia CCC Stable 2011-12-12 [17] CC Negative 2012-05-11 [17] Greece Sudan C Stable 2010-12-06 [17]

Not rated
UN member states that have not been assigned a credit rating by any of the four rating agencies.

Country Afghanistan Antigua and Barbuda Bhutan Brunei Darussalam Burundi Central African Republic Chad Comoros Congo Cote d'Ivoire Democratic Republic of Congo Djibouti Dominica Equatorial Guinea Eritrea Federated States of Micronesia Gambia Guinea GuineaBissau Guyana Haiti Iran Iraq Kiribati Kyrgyzstan Laos Liberia

Details

Fitch has suspended Gambias credit rating after its only traded international bond expired.[21]

Fitch has withdrawn all ratings for Iran following the maturity and full repayment of the last outstanding sovereign eurobond on 21 April 2008.[22]

Country Libya Malawi Maldives Mali Marshall Islands Mauritania Monaco Myanmar Nauru Nepal Niger North Korea Palau Saint Kitts and Nevis Saint Lucia Samoa Sao Tome and Principe Sierra Leone Solomon Islands Somalia South Sudan Swaziland Syria Tajikistan Tanzania Timor Leste Togo Tonga

Details Fitch has withdrawn all ratings for Libya because it doesn't have enough information to maintain coverage of the issuer.[23]

Mali was given a credit rating in 2004 as part of a UN development initiative,[24] but the rating was later withdrawn.[25]

Country

Details Moody has withdrawn its rating because it had insufficient information to Turkmenistan maintain coverage of the issue.[26] Tuvalu Uzbekistan Vanuatu Yemen Zimbabwe The Uzbek government aims to obtain a sovereign credit rating by 2015.[27]

Table
The credit rating is a financial indicator to potential investors of debtsecurities such as bonds. These are assigned by credit rating agencies such as Moody's, Standard & Poor's, and Fitch Ratings to have letter designations (such as AAA, B, CC) which represent the quality of a bond. Bond ratings below BBB/Baa are considered to be not investment grade and are colloquially called junk bonds.
Moody's S&P Fitch

Long-term Short-term Long-term Short-term Long-term Short-term Aaa Aa1 Aa2 P-1 Aa3 A1 A2 A3 P-2 Baa1 Baa2 P-3 Baa3 Ba1 Not prime BBBBB+ B BBB+ BBB A-3 BBBBB+ B Non-investment grade AAA+ A-1 A AA-2 BBB+ BBB F3 Lower medium grade A AF2 AAA+ F1 Upper medium grade AAA AA+ A-1+ AA AA AAA AA+ F1+ High grade Prime

Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3

BB BBB+ B BCCC+ CCC CCCCC C

BB BBB+ B B-

speculative

Highly speculative

Substantial risks Extremely speculative CCC C Default imminent with little prospect for recovery

Ca C C / / D / DDD DD D /

In default

Credit rating agencies

Credit rating agencies registered as such with the SEC are "Nationally recognized statistical rating organizations". The following firms are currently registered as NRSROs: A.M. Best Company, Inc.; DBRS Ltd.; Egan-Jones Rating Company; Fitch, Inc.; Japan Credit Rating Agency, Ltd.; LACE Financial Corp.; Moodys Investors Service, Inc.; Rating and Investment Information, Inc.; and Standard & Poors Ratings Services. Under the Credit Rating Agency Reform Act, an NRSRO may be registered with respect to up to five classes of credit ratings: (1) financial institutions, brokers, or dealers; (2) insurance companies; (3) corporate issuers; (4) issuers of asset-backed securities; and (5) issuers of government securities, municipal securities, or securities issued by a foreign government.[1] S&P, Moody's, and Fitch dominate the market with approximately 90-95 percent of world market share.

Credit rating tiers

Moody's assigns bond credit ratings of Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C, with WR and NR as withdrawn and not rated.[2] Standard & Poor's and Fitch assign bond credit ratings of AAA, AA, A, BBB, BB, B, CCC, CC, C, D. As of April 2011, there were 4 companies rated AAA by S&P:[3]
Moody's Standard & Poor's AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BFitch Credit worthiness [4][5] An obligor has EXTREMELY STRONG capacity to meet its financial commitments.

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3

AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B B-

An obligor has VERY STRONG capacity to meet its financial commitments. It differs from the highest rated obligors only in small degree.

An obligor has STRONG capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.

An obligor has ADEQUATE capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. An obligor is LESS VULNERABLE in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitments. An obligor is MORE VULNERABLE than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments. An obligor is CURRENTLY VULNERABLE, and is dependent upon favourable business, financial, and economic conditions to meet its financial commitments. An obligor is CURRENTLY HIGHLY-VULNERABLE.

Caa

CCC

CCC

Ca

CC

CC

The obligor is CURRENTLY HIGHLY-VULNERABLE to nonpayment. May be used where a bankruptcy petition has been filed. An obligor has failed to pay one or more of its financial obligations (rated or unrated) when it became due. Preliminary ratings may be assigned to obligations pending receipt of final documentation and legal opinions. The final rating may differ from the preliminary rating. Rating withdrawn for reasons including: debt maturity, calls, puts, conversions, etc., or business reasons (e.g. change in the size of a debt issue), or the issuer defaults. [2] This rating was initiated by the ratings agency and not requested by the issuer. This rating is assigned when the agency believes that the obligor has selectively defaulted on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. No rating has been requested, or there is insufficient information on which to base a rating.

e, p

pr

Expected

WR

unsolicited unsolicited

SD

RD

NR

NR

NR

Investment grade
A bond is considered investment grade or IG if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's or BBB(low) or higher by DBRS. Generally they are bonds that are judged by the rating agency as likely enough to meet payment obligations that banks are allowed to invest in them. Ratings play a critical role in determining how much companies and other entities that issue debt, including sovereign governments, have to pay to access credit markets, i.e., the amount of interest they pay on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for issuers' borrowing costs. Bonds that are not rated as investment-grade bonds are known as high yield bonds or more derisively as junk bonds. The risks associated with investment-grade bonds (or investment-grade corporate debt) are considered significantly higher than those associated with first-class government bonds. The difference between rates for first-class government bonds and investment-grade bonds is called investment-grade spread. The range of this spread is an indicator of the market's belief in the stability of the economy. The higher these investment-grade spreads (or risk premiums) are, the weaker the economy is considered.

Criticism
Until the early 1970s, bond credit ratings agencies were paid for their work by investors who wanted impartial information on the credit worthiness of securities issuers and their particular offerings. Starting in the early 1970s, the "Big Three" ratings agencies (S&P, Moody's, and Fitch) began to receive payment for their work by the securities issuers for whom they issue those ratings, which has led to charges that these ratings agencies can no longer always be impartial when issuing ratings for those securities issuers. Securities issuers have been accused of "shopping" for the best ratings from these three ratings agencies, in order to attract investors, until at least one of the agencies delivers favorable ratings. This arrangement has been cited as one of the primary causes of the subprime mortgage crisis (which began in 2007), when some securities, particularly mortgage backed securities (MBSs) and collateralized debt obligations (CDOs) rated highly by the credit ratings agencies, and thus heavily invested in by many organizations and individuals, were rapidly and vastly devalued due to defaults, and fear of defaults, on some of the individual components of those securities, such as home loans and credit card accounts.

Municipal bonds
Municipal bonds, instruments issued by local, state, or federal governments in the United States, have a separate naming/classification system which mirrors the tiers for corporate bonds.

Default rates
The historical default rate for municipal bonds is lower than that of corporate bonds. The Municipal Bond Fairness Act (HR 6308),[6] introduced September 9, 2008, included the following table giving bond default rates up to 2007 for municipal versus corporate bonds by rating and rating agency.
Cumulative Historic Default Rates (in percent) Moody's Rating categories Municipal Corporate Municipal Corporate Aaa/AAA Aa/AA A/A Baa/BBB Ba/BB B/B 0.00 0.06 0.03 0.13 2.65 11.86 0.52 0.52 1.29 4.64 19.12 43.34 0.00 0.00 0.23 0.32 1.74 8.48 0.60 1.50 2.91 10.29 29.93 53.72 S&P

Caa-C/CCC-C

16.58

69.18 2.09 31.37 9.70

44.81 0.20 7.37 0.29

69.19 4.14 42.35 12.98

Investment Grade 0.07 Non-Invest Grade 4.29 All 0.10

SME Rating Agency of India

From Wikipedia, the free encyclopedia Jump to: navigation, search SME Rating Agency of India

Type Founded

Public 2005 [1]

Headquarters Mumbai, Maharashtra, India Key people Services Website Mr.RakeshRewari, Chairman, Mr.ParagPatki, CEO[2] Research, Risk and PolicyAdvisory Official Website

SME Rating Agency of India Limited (SMERA) is a third party rating agency exclusively set up for micro, small and medium enterprises (MSME) in India for ratings on creditworthiness. It provides ratings which enable MSME units to raise bank loans at competitive rates of interest.

History
The agency was founded in 2005 by Small Industries Development Bank of India (SIDBI),[4] Dun & Bradstreet Information Services India Private Limited (D&B) and several leading banks in the country.[5]

Achievements
The Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) has awarded SIDBI with "Outstanding Development Project Award" for setting up SMERA. The award was given under the SME Development Category during the 30th ADFIAP Annual Meeting held on May 10, 2007 at Hanoi, Vietnam.[6] SMERA has also been registered under Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 making it only the sixth rating agency in India to rate issues such as IPO, bonds, commercial papers, security receipts and others.[7]

News of cra LONDON: Fitch ratings agency downgraded Cyprus' sovereign credit grade to junk status, citing a rise in the amount of rescue money needed by its banks, which are heavily exposed to Greece. It lowered the euro zone country's rating by one notch to BB+ from BBB- and kept a negative outlook, which means more downgrades are possible in coming months due to a possible worsening of the situation in Greece. With this downgrade, Fitch joins the other major ratings agencies _ Moody's and Standard & Poor's _ in pushing Cyprus' credit rating into junk territory. Cyprus is scrambling to find by a June 30 deadline about (euro) 1.8 billion ($2.26 billion) _ or about a tenth of its gross domestic product _ to recapitalize its second largest lender, Cyprus Popular Bank, which is the most heavily exposed of the country's banks to Greek government debt. Cypriot officials have said that they would seek foreign aid from fellow eurozone nations or from Russia, or a combination of the two. Fitch estimates Cyprus will need another (euro) 4 billion ($5 billion) to recapitalize its banking sector due to their Greek exposure and because of a rise in bad loans over the last year as the Cypriot economy has shrunk and unemployment has risen to record levels. Cypriot banks will also suffer more losses on loans to Greek businesses and households as the Greek economy

continues to contract. ``Fitch acknowledges that its estimates of the losses and capital needs of Cypriot banks are subject to considerable uncertainty and are conservative,'' the agency said. ``Nonetheless, in Fitch's opinion, Cypriot banks will require substantial injections of capital in order to secure confidence in their financial stability.'' The agency said it expects Cyprus to clinch a bilateral loan _ likely from Russia _ to cover its refinancing needs of some (euro) 2.25 billion ($2.82 billion) for next year, but also expects the country to apply for an EU bailout to help with the banks' recapitalization. Unable to borrow from international markets due to its junk credit rating, Cyprus has had to rely on a (euro) 2.5 billion ($3.13 billion) loan from Russia to cover its needs for the year. The Cypriot government is wary of tapping the EU bailout fund for the full amount it would need to recapitalize its banks and to pay its bills for next year because of the tough conditions that may come attached. Cyprus is keen to protect its 10 percent corporate tax which attracts much foreign business. Fitch predicts Cyprus' government debt will shoot above 100 percent of GDP, more than 12 points more than its previous estimate. The agency said that a government target to bring the budget deficit below 3 percent of GDP through another round of spending cuts and tax increases will be missed by as much as a percentage point. It also sees the Cypriot economy stagnating this year, though it expects a return to growth over the medium-term as long as the government manages to keep the deficit below 3 percent of GDP next year.