A rating agency is a company that assesses solvency financial institutions, quality of asset management, corporate management and timely settlement of obligations. The most famous and popular product of rating agencies is a credit rating. The indicator is calculated both for an individual company and for the state as a whole and expresses an assessment of solvency.
International rating agencies
International rating agencies play a strategic role in the global economy. Their assessment activities form the degree of trust in banking structures, the attractiveness of individual companies or entire states for investors increases or decreases the chances of getting.
Despite the huge impact on world economy Each rating agency was originally created and operates as a commercial structure. The main goal of such organizations is profit, regardless of whether they operate on an international or national scale. This fact is the main reason for doubts about the objectivity of rating agencies.
National rating agency
In the Russian Federation today there are 4 accredited rating agencies. The National Rating Agency (hereinafter NRA) is considered one of the leading agencies Russian Federation. Despite the fact that the NRA has been operating since 2002, it was included by the Bank of Russia in the register of credit rating agencies only in 2019. Over the 14 years of operation, the company has come a long way. From a rating project in an experimental format, the organization has grown into an independent business project with high level efficiency and profitability.
Major rating agencies
The so-called “Big Three” companies are considered the most authoritative in the ratings of rating agencies, including Fitch Ratings, Moody’s, and Standard & Poor’s. It is estimated that their reports account for approximately 95% of the entire international market for valuation services. It is these companies that assign credit ratings to the most popular companies and states among investors. In fact, such opportunities give the main rating agencies to influence the economic and political situation on the world stage. Decisions made on credit ratings are often used as a lever of political pressure and are biased.
Credit rating agency
Credit rating agencies are involved in calculating the creditworthiness of individual banking institutions. As a rule, research is initiated by credit institutions on a paid, commercial basis. The assigned rating can be long-term or short-term in nature and depends on the timing of the financial institution's borrowings.
When compiling such ratings, several different approaches are used. As a rule, we are talking about comparing a series financial indicators. There are also more complex schemes, according to which each criterion receives a certain specific weight, and the final score is summed up as a total number of points.
Russian rating agencies
- "Expert RA"
- National Rating Agency (NRA)
- “National Credit Ratings” (NCR), created by the RBC media holding
Difference between global and national rankings
In independent Russia there has always been an objective need to create independent rating agencies. The reason is that international agencies do not have the opportunity to give individual Russian companies a rating higher than that of the state as a whole.
Valuation activities Russian companies costs an order of magnitude cheaper. In addition, their assessment is considered more objective, since it takes into account the specifics of business in the Russian Federation. The services of domestic RAs, in particular, are in demand among companies that do not even plan to develop international markets.
Are rating agencies objective?
Each rating agency commercial organization which seeks to maximize its own profits. This feature of RA prevents them from being completely objective. IN last years There are often cases of explicit or hidden corporate orders with specific objectives: to make a competitor’s rating worse, and a specific company better. Money buys very serious reports. A striking example of this statement is the crisis of 2008-2009, when a whole group of corporations with impeccable ratings found themselves on the verge of ruin.
Minimum requirements for rating agencies
- Providing reliable and objective information based on historical data. The rating is subject to periodic review, and the methodology is changed every three years.
- Independence. The ratings are free from economic pressure and political interference.
- International access and openness.
- A rating agency needs a sufficient number of staff to organize the analytical process with objective results.
- Rating agencies are officially recognized by regulatory authorities and the professional community.
How can a private investor use information from rating agencies?
The reputation of rating agencies was seriously damaged after the 2008 crisis. It turned out that companies with impeccable ratings are capable of bursting like soap bubbles. For this reason, even the results of the Big Three reports should not be taken as the ultimate truth.
Moreover, the credit rating itself has never been and will not be a recommendation to buy or sell any assets. Ratings show only one characteristic - the level of creditworthiness of individual companies or states. And even companies and states with an AAA rating are susceptible to such a phenomenon as default. The difference is that among companies with a AAA rating, cases of bankruptcy will be isolated, while among companies with lower rates, bankruptcy will occur much more often.
Rating agencies(RA) – organizations specializing in assessing the creditworthiness of issuers and the investment quality of issued securities. Based on the results of their research, agencies assign credit ratings.
In order to use ratings correctly, it is necessary to understand that when issuing ratings, agencies primarily evaluate the likelihood of non-payment of debt. However, the ratings do not reflect a number of other factors that may be important for the borrower in the future, such as changes in economic conditions or problems with current liquidity.
RAs do not provide guarantees for the results of their research and do not fully disclose the methodology used.
Rating assignment is a commercial service. Its customers are states, companies, and financial organizations. The presence of a rating gives issuers the opportunity to offer their securities to a wider range of investors, reduces interest rates, and also makes the borrower famous and affects his reputation.
Thanks to ratings, investors can get an independent opinion on the possibility of investing Money, reduce risks, compare securities based on risk-return ratio. At the same time, agencies monitor the solvency of borrowers not only at the time of assigning a rating, but also throughout the entire period of cooperation, so investors have access to information about the reliability of their investments in virtually real time.
However, the disadvantage of RAs is that their data is often late. Their absolute failure was that they were unable to warn investors in a timely manner about problems in companies such as AIG, Enron, Lehman Bros., Parmalat, etc. The agencies were particularly criticized as a result of the 2008 crisis, when investment ratings were assigned to companies that were experiencing serious financial difficulties and even caused a crisis in the American real estate market. It was then that for the first time a number of leading investors began to doubt the professional competence RA.
It is believed that the main reasons for the failures in the work of the agencies were: the slow speed of reaction to events, the assumptions used in the methodology between the agencies themselves, as well as a conflict of interest when the assignment of the rating is paid by the state or the customer company interested in a positive assessment.
Historically, international ones have been registered in the United States. This is due to the fact that American investment funds are considered the largest participants in the capital market.
As for national RAs, it is believed that they can better take into account local specifics. The most famous Russian agencies are Moody's Interfax Rating Agency, AK&M,.
See what “Rating agencies” are in other dictionaries:
RATING AGENCIES- (English rating agencies) – international and national analytical services that compose integral risk indices economic entities according to the degree of reliability as borrowers. R.a. assess the reliability of various types of debt obligations... ... Financial and credit encyclopedic dictionary
International rating agencies- (International rating agencies) Rating agencies are organizations involved in assessing the solvency of entities financial market International rating agencies: credit rating of countries, Fitch Ratings, Moody s, S&P, Morningstar,... ... Investor Encyclopedia
Credit rating and world rating agencies- For the first time in history, the international rating agency S P downgraded the US credit rating from the maximum AAA to AA+; this event occurred after the US averted a possible default. A credit rating represents an independent and reliable… Encyclopedia of Newsmakers
- (RA) – four agencies created in Russia and received accreditation by the Russian Ministry of Finance along with the “big three” international rating agencies: Expert RA, National Rating Agency (NRA), AK&M, RusRating. Moreover, in Russia... ... Banking Encyclopedia
European debt crisis- This article describes current events. Information may change quickly as an event unfolds. You are viewing the version of the article dated 14:59 December 13, 2012 (UTC). (... Wikipedia Wikipedia
Coupon- (Coupon) Concepts of coupon, types of bonds, bond market Information about the concept of coupon, types of bonds, bond market Contents Contents Types of bonds bonds general characteristics and classification of bonds Corporate bonds... ... Investor Encyclopedia
National rating agency- This article should be Wikified. Please format it according to the rules for formatting articles... Wikipedia
Welcome traders to the ForexLabor website. Economics, loans, accounts, record keeping, all this accompanies not only ordinary people like you and me, but also entire states, only on a large scale. In order for a person to be given a loan from a bank, everything about him is collected. necessary information in order to assess its solvency. It is beneficial for the bank to have the money returned to it, preferably with interest.
The best broker, in my opinion, for day trading and scalping.
It’s the same with states, only private investors and investment funds act as bankers for the state. But how can they know whether they will make a profit if they invest their hard-earned money in one country or another? Will the business be closed down or, which is quite possible in some countries, will it be nationalized? These and many other risks, as well as the level of solvency, are called upon to be assessed international rating agencies .
What is a rating agency?
At its core rating agency is a company that produces a specific product. A commodity is an assessment of a particular subject of the world market economy, their product is the hard work of hundreds of analysts with many years of experience who can distinguish a potential bankrupt from a promising enterprise by analyzing their official and not so official statements.
Rating agencies though commercial companies, but the initiators of their creation are often states. Co-founders often include consulting firms, news agencies and financial institutions. To make the work of a rating agency independent, control over its activities is distributed among participants in such a way that no one has a casting vote or the ability to individually influence the most important decisions of the company's management.
Before delving further into this topic, it’s worth saying right away that the assessments and ratings that agencies provide are not a 100% guarantee of the solvency of the research object. Rating agencies They make no guarantees and never tell anyone about their rating method.
Who usually orders the services of rating agencies? In most cases, the customer is various countries and companies that operate in the financial field. Having a rating from one of the well-known agencies allows companies and customer countries to instill more confidence among potential investors, and thus attract more money.
What exactly do rating agencies evaluate?
As has already been said many times, rating agencies evaluate the solvency of the issuer of debt obligations, giving it an appropriate assessment. Roughly speaking, they check a country or company to see if they can repay debts or not. In addition, some ratings indicate whether the principal and interest obligations will be repaid.
The higher the so-called credit rating , the more reliable the valued object is for investing in it. The most reliable securities in the world are considered to be US Treasury bonds; they are assigned the highest rating, the classification of which we will talk about a little later.
Disadvantages of rating agencies
Before 2008, indicate disadvantages of rating agencies it was not entirely possible, since there were practically no precedents casting doubt on the competence of the personnel and the unreliability of the assessments of international rating agencies. But it was 2008 that changed everything.
Presenters rating agencies failed to foresee the US real estate crisis and the collapse of corporations such as AIG, Enron, Lehman Bros., Parmalat and many others. This caused a significant blow to the reputation appraisal companies, and significantly undermined confidence in their activities.
Because of this crisis it was discovered the main problem rating agencies are slow. Grading sometimes does not keep pace with the dynamically changing global economic situation.
Based on this, the object being assessed may become an unreliable borrower until a rating is assigned. Or, on the contrary, financial condition the company may become more attractive and receive a lower rating than it should have been given, but this is not as bad for investors as the previous option.
Well-known rating agencies
- Fitch Ratings;
- Moody's;
- Standard & Poor's;
- Morningstar;
- A.M. Best Company.
Each company has its own specifics and rating methodology. Of these five companies, I would single out three as the most reliable and influential: Standard & Poor’s, Moody’s and Fitch Ratings. Let's talk about them in more detail.
Standard & Poor's
Also known by the acronym S&P. Many people recognize it as this rating agency is the founder of such powerful stock indices as the S&P 500 in the United States and the S&P 200 in Australia.
Many serious private investors, financial institutions and even countries consider this company one of the most 
authoritative in the world and sometimes rely entirely on the results of their research in making important decisions.
Standard & Poor's has been in business for more than 150 years, providing credit ratings, editing stock indexes, and conducting research activities in the field of risk management.
From the latest ratings issued, it can be noted that not so long ago, the company lowered the credit rating of Ukraine from CCC to SS and changed its outlook from stable to negative. In essence, this means that there is little or no investment in the country, and the country has no way to pay its obligations, not to mention paying interest. It is worth noting that such a low rating was given despite Ukraine receiving impressive credit funds from the IMF and the EU to stabilize the economic situation.
Moody's
The agency has a permanent staff of 4,500 experts. The company has more than 26 representative offices in different countries of the world. A distinctive feature of the company is that after receiving an assessment, the agency leads a particular company for a certain period, its duration is agreed upon separately at the time of concluding the contract. After this period, Moody's either changes the previously assigned rating or leaves it at the same value. 
If the customer company is cooperating with Moody’s for the first time, then in this case the expert group holds an initial meeting with the management of the customer company to familiarize themselves with and transfer the list of documents that will be required for the analysis. Sometimes some documents are already available, since they are no different from those prepared for management on a quarterly basis.
This company also assessed Ukraine, but a little earlier. Moody's downgraded the rating of Ukrainian bonds in 2012. There were several reasons for this: the cessation of publication of NBU reports, the lack of success in carrying out reforms and agreements with the Russian Federation on gas, the unpredictable political situation and administrative interference in the activities international market Forex. As a result of all these actions and inactions, the bond rating fell from B2 to B3.
Fitch Ratings
The foundations of the company were laid in 1913 with the publishing house of financial statistics. Over time, all this has grown into an independent rating agency, whose assessments are trusted all over the world. Currently, Fitch Ratings has a staff of about two thousand people in more than 50 countries. 
Fitch Ratings is the first company to be recognized national commission By security USA and licensed by NRSRO. This agency is known, among other things, for issuing two very important ratings: Short-Term Issuer Default Rating and long-term rating issuer default abbreviated as ER.
Short-term RED is assigned to the subject economic activity, which must fulfill its obligations within a certain grace period(from 1 to 3 years).
How do rating agencies give ratings?
Assigning a rating is a complex research activity. Rating agencies evaluate many variables such as financial strength, ability to pay bills, condition of property, profitability and business activity.
Each of these variables includes several more. For clarity, take a look at the figure below.
This is a simplified diagram, an example of assessing an ordinary enterprise. Of course, as already mentioned, the agencies do not disclose the methodology of their work. In addition, the scoring algorithm may differ depending on what exactly is being assessed.
The rating algorithm itself looks something like this: The rating agency and the customer company enter into a contract for the provision of services. Further, at the request of the agency, the company provides all the necessary information, which may also include an interview with the company’s management.
After collecting information, research is carried out and, based on this, the company is assigned a preliminary assessment to the customer. The agency informs the company about the results of its work.
- The customer agrees with the rating given. A press release is issued and the rating is published in official publications.
- The company disagrees with the results. A non-disclosure agreement is signed and documents are never made public.
Rating classification
An investment rating means that an economic entity is reliable and able to fully pay its debt obligations. Investors are more willing to invest in the economies of countries with investment rating. The highest investment rating is AAA; only a few, such as US government bonds, have it. The lowest investment rating is BBB, investment attractiveness owners of this assessment are quite high, but economic situation may change, which suggests that investors should be cautious.
A speculative rating is no longer good, even at the highest BB value. States and companies with a rating of this class pay high interest according to obligations. In addition, companies that engage in investments have strict restrictions on the amount of funds that can be invested in speculatively rated issuers.
A positive forecast means that the current situation may improve over a period of 3 to 6 months.
A stable forecast means that no improvements can be expected, but a serious deterioration of the situation is unlikely to occur in the next six months.
Negative – speaks for itself; it is quite possible that the issuer’s situation with such a forecast will worsen.
Rating scale of international rating agencies
|
Moody's |
Standard & Poor's |
Fitch Ratings |
Reliability level |
| AAA | AAA | AAA | Maximum reliability |
| AA1 | AA+ | AA+ | High reliability |
| AA2 | AA | AA | |
| AA3 | AA- | AA- | |
| A1 | A+ | A+ | Above average reliability |
| A2 | A | A | |
| A3 | A- | A- | |
| VAA1 | BBB+ | BBB+ | Below average unreliability |
| VAA2 | BBB | BBB | |
| VAA3 | BBB- | BBB- | |
| BA1 | BB+ | BB+ | Speculative level |
| BA2 | BB | BB | |
| BA3 | BB- | BB- | |
| IN 1 | B+ | B+ | Highly speculative level of reliability |
| AT 2 | IN | IN | |
| AT 3 | IN- | IN- | |
| SAA1 | SSS+ | Significant risks | |
| SAA2 | SSS | Extremely speculative level | |
| SAA3 | SSS- | SSS | Pre-default state |
| SA | SS | ||
| WITH | |||
| WITH | IN | DDD | Default |
| DD | |||
| D |
The role of rating agencies in the global economy
Rating agencies are among the most important organizations in the global economy. I think you won't argue about that modern world would be impossible without investment. Rating agencies help investors invest in more reliable companies and warn against “garbage,” thereby filtering the economy from uncompetitive players, leaving the strongest in the market.
Compiling bank ratings, financial companies, business structures, we often rely on data published by reputable and respected rating agencies. Their assessments are listened to all over the world; decisions in business and politics are made on their basis.
Today we present Top 10 most authoritative rating agencies, both in the international and Russian arena.
10. National Rating Agency
This Russian rating agency was created in 2000 and was accredited by the Russian Ministry of Finance. Specializes in assigning ratings to banks, non-bank credit institutions, insurance companies and non-governmental pension funds, as well as management and investment companies.
9. A.M. Best Company, Inc.
It is an international rating agency headquartered in Oldwick, New Jersey, USA. Main specialization – Insurance companies. The specificity of the assessment is to determine the rating financial stability, which determines the extent to which the insurer is able to fulfill its obligations to policyholders. The formula for calculating the rating is the property of the company
8. Dominion Bond Rating Service (DBRS)
The credit rating agency was founded in Canada in 1976. Today it is the largest Canadian RA. The existing scale of short-term debt ratings shows how great the risk is that the borrower will not be able to timely fulfill its own obligations on short-term debts.
7. Moody`s Interfax Rating Agency
The leading rating agency in Russia, where they are assigned on a national scale, which reflects the agency’s opinion on the creditworthiness of the issuer and its debt obligations on the national market. Russian financial institutions, regional and municipal administrations, as well as companies in the non-financial sector resort to the services of Moody's Interfax Rating Agency.
6. RA AK&M
This Russian rating agency, accredited by the Russian Ministry of Finance, was created in 1994. In addition to company ratings, the RA assesses the creditworthiness of the constituent entities of the Russian Federation and municipalities. AK&M also compiles ratings of leading enterprises of the Russian Federation.
5. "Expert RA"
One of the most authoritative rating agencies in Russia. It is the information and research division of the Expert group of companies. Founded in 1997 The agency compiles credit ratings of private companies, credit ratings of regions and evaluates their investment attractiveness.
4. Morningstar (NASDAQ: MORN)
American RA specializes in collecting and analyzing information on investment funds. Consumers are provided with databases, training courses, reviews and software. The fund rating system is based on assigning stars (from 1 to 5), which allows summing up data on the fund's stability in terms of the ratio of profitability and risk.
3. Standard & Poor's (S&P)
An agency engaged in analytical research of the financial market. The company is one of the three most influential international RAs. American stock index The S&P 500 and the Australian S&P 200 were created by this company. The agency evaluates both issuers and individual debt obligations. The Standard & Poor’s international scale allows you to compare the reliability of issuers and obligations of different countries.
2.Moody's
One of the most authoritative international ones in the world. RA is a subsidiary of Moody's Corporation. The agency is engaged in research and risk analysis, assigning credit ratings. Moody's has more than 4,500 employees in 26 countries.
1. Fitch Ratings
This international diversified corporation has gained fame precisely as a rating agency. Back in 1924, the Fitch agency introduced a rating scale from “AAA” to “D”. Today, the company's core mission is to provide independent and future-oriented credit assessments, analytics and research to global markets.
Credit ratings assigned to banks by international rating agencies allow us to judge their creditworthiness, financial stability, reliability and reputation. For ordinary consumers financial services- these indicators will probably say little, but for the credit institutions themselves - this assessment is very important, trust in financial organization, the possibility of attracting borrowed money and conditions for obtaining loans. In general, investors will make their decisions based on ratings. And, ultimately, from these financial decisions and will depend on the price at which banks will lend to their clients.
Among the most authoritative international rating agencies, three should be highlighted: largest companies: Moody’s Investors Service (Moody’s), Fitch Ratings and Standard & Poor’s (S&P). Each of them assigns its own ratings to banks on a national and international scale: long-term and short-term credit ratings, bank deposits, financial stability ratings of banks, etc.
Each agency has its own rating scale, which has letter designations, usually from "AAA" to "D". In addition, the modifiers “+” and “-” or the numbers 1, 2 and 3 can be added to the letter categories if the bank falls into intermediate values. To show possible changes in the rating in the future, the agency's forecast is used. It can be: “Stable” - this means that a change in the rating is not expected in the next couple of years; “Developing” – the rating can either increase or decrease; “Negative” – the rating may be downgraded; “Positive” – a rating increase is possible.
| Moody's long-term credit rating | Long-term credit rating Fitch Ratings | Long-term credit rating S&P | Symbol designation |
| Aaa | AAA | AAA | Debentures exceptionally high quality, subject to minimal credit risk |
| Aa | A.A. | A.A. | The ability to pay off debt obligations is very high |
| A | A | A | Creditworthiness level is high |
| Baa | BBB | BBB | The level of creditworthiness is satisfactory |
| Ba | BB | BB | Insufficient level of creditworthiness, unfavorable economic conditions may affect solvency |
| B | B | B | Debt obligations are subject to high credit risk |
| Caa | CCC | CCC | Risk of default, debt payments depend on favorable economic conditions |
| Ca | CC | CC | Serious difficulties with debt payments, close to default. |
| C | C | C | Debt payments continue, but default is inevitable |
| - | - | SD | Default on certain obligations |
| D | D | D | Default declared |
Rating assignment is a paid service. After concluding an agreement with the selected rating agency, the bank must provide the company's analysts with all the necessary information about its activities. After this, a rating meeting is organized with representatives of the management of the credit institution. Based on an assessment of all received data, the rating committee makes a decision on assigning a rating. If the client does not agree, he can appeal, providing additional information. Please note that the bank makes the decision to publish the rating at its own discretion.
Taking into account the fact that rating agencies have different approaches to assessing the factors that determine a bank’s position and have their own specifics, many credit organizations contact several rating agencies at once. After all, the bank’s reputation in the domestic and international financial markets largely depends on this.