rating agency

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.

Rating Service

A company that evaluates preferred stocks and debt securities based on the likelihood of default. The ratings service provides an objective rating to the security; the rating is higher when the likelihood of default is lower. There are three main ratings services: Moody's, Fitch, and Standard & Poor's. Companies issuing new preferred stocks or debt securities pay one or more of the ratings services to have their securities rated. Banks are not allowed to invest in securities with ratings below a certain level. See also: Investment-grade, Junk.

rating agency

A company that evaluates the creditworthiness and strength of other companies and assigns a score to them,such as A,AA,and so on.

References in periodicals archive ?
(14) Eliminating this provision will increase rating agency exposure to litigation from unhappy investors who relied on inaccurate ratings to their financial detriment.
Summary: The international rating agency "Fitch Ratings" confirmed, on Tuesday, the sovereign rating of Morocco, with a "stable" outlook, saying that the Kingdom continues to benefit from "solid" fundamentals in comparison with other countries in the region.
"However," she continued, "where a rating agency has disseminated their ratings to a select group of investors rather than to the public at large"--as was the case in Abu Dhabi Commercial Bank--"the rating agency is not afforded the same protection."
The obvious alternative is a state-owned credit rating agency. Without a profit motive the incentives would no longer be biased.
(ADPnews) - Dec 21, 2009 - Rating agency Standard & Poor's (S&P) confirmed on Monday its "A" credit rating, with a stable outlook, on Austrian insurer Uniqa (WBAG:UQA).
Also, if any additional nonrating services have been provided by the credit rating agency or its affiliates to the registrant or its affiliates over a specified period of time, disclosure of the services and the fees paid for those services would be required.
In complying with corporate regulations, Members United utilized ratings as a key metric but also reviewed rating agency comments, analysis from other providers like brokers, analysts and industry sources, its own internal modeling, the historical performance of asset types and forward-looking reviews by industry experts.
The 2009 SEC rules are designed to fully implement the Credit Rating Agency Reform Act of 2006 (the Reform Act), signed into law by President George W.
ONE OF THE MORE interesting projects state insurance commissioners have on the burner is a plan to start up a rating agency.
Investment banks soon learned to play one rating agency against another and only pay for the highest two ratings they would receive.
As these economic-capital methods have been extended to more products and risks, it appears that required capital can be reduced significantly from rating agency requirements.