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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They invest in the Philippines, and if they're giving us more credit to the credit-rating agencies do, then that's the best of all worlds, I think,' Beltran said.
"Credit-rating agencies historically lag the real economic fundamentals, whereas markets are ahead," Brett Wander, the chief investment officer for fixed income in San Francisco at Charles Schwab Investment Management, told Bloomberg.
TOKYO - The government endorsed a bill Friday to regulate credit-rating agencies in response to criticism that their lax rating activities are partly responsible for the current financial crisis.
aThe US Senate Committee on Banking, Housing and Urban Affairs is considering the possibility of legislating on credit-rating agencies. The investigation, which will directly impact on the three major international agencies, Standard & Poor's, Moody's and Fitch, will focus on competition, registration, conflict of interests and issues of transparency.
Two other credit-rating agencies -- Standard & Poor's Ratings Services and Moody's Investors Service -- have already lowered Ford's ratings to junk status.
And there are concerns on the credit side: Critics suggest that credit-rating agencies would lower the state's bond rating if the state proceeds with the proposal (agencies don't like it when states sell off one-time assets to solve continuing budget problems).
The Finance Ministry said Thursday it has again sent letters to two foreign credit-rating agencies, saying their explanations on the default risk of Japan's government bonds are insufficient.
While acknowledging that standard setters such as IFAC have no authority to mandate compliance, Ball is optimistic that other factors, such as the influence of investors, lenders, credit-rating agencies and voters, will encourage governments to cooperate.
"A REIT that hits the target is on the radar screens of more analysts; has more liquidity, which means it will attract more large institutional investors to buy its stock; and can get noticed by the credit-rating agencies and likely attain an investment-grade rating, which means its cost of capital is lower," explains Korpacz.
The Ministry of Finance (MOF) said Tuesday it has sent letters to three foreign credit-rating agencies questioning the credibility of their assessments of Japanese government bonds and asking for further explanations on rating decisions.
The letter was in response to one sent late April by the ministry to three Western credit-rating agencies, including Moody's, which questioned the credibility of their rating decisions and asked for further explanations.
Japan has been frustrated by the downgrade of its sovereign bonds by large credit-rating agencies, including Standard & Poor's Corp.