Credit Rating Agency

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Credit Rating Agency

A company that provides investors with assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. A high rating indicates low risk and may therefore encourage investors to buy a security. Additionally, banks may only invest in securities with a high rating from two or more credit rating agencies. The SEC recognizes 10 firms as credit rating agencies; Fitch, S&P, and Moody's are the three most prominent. However, the methods of credit ratings agencies have been subject to criticism. For example, most agencies gave high-risk mortgage-backed securities top ratings until they defaulted at the collapse of the housing bubble.
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More specifically, on the thorny question of limiting the participation of shareholders in different credit ratings agencies (limitation of cross-shareholding), the Council and Parliament have agreed on the following measure: an investor who holds a share of at least 5% in a credit ratings agency will not be authorised to hold shares of 5% or more in anotherratings agency.
A ratings agency must also respect the obligation of transparency if one of its shareholders, who holds 5% or more of its capital, also holds 5% or more of the rated entity.
In the Asia-Pacific region, Standard & Poor's has been voted most influential ratings agency by Finance Asia magazine, and Ratings Agency of the Year 2001 by INSTO.
The bank rating services currently offered worldwide by BankWatch will now become part of Fitch, Fimalac's international ratings agency.
Fimalac, the diversified French operating company, today announced that its wholly-owned subsidiary Fitch, the world's third largest ratings agency, has acquired BankWatch, the leading ratings agency specializing in banks and financial institutions, from the Thomson Financial group of Canada.
PA), is a diversified French operating company with interests in a variety of service activities, including hand tools and garage equipment through its subsidiary FACOM, the world's third largest ratings agency through FITCH, chemical product storage through its subsidiaries LBC and PETROUNITED, and mailing equipment machines through its subsidiary SECAP.
Following the completion of regulatory approval, the bank rating services currently offered worldwide by BankWatch, through Thomson Financial, will become part of Fitch, Fimalac's international ratings agency.