The credit rating agencies you probably don’t know about
By: Ximena Peianado
Whenever we talk about a country’s credit rating, it is generally referring to the verdicts of the three best-known agencies in the world: Moody’s, Standard and Poor’s and Fitch Ratings.
These three New York agencies, which control 90 percent of the whole market, were the only nationally recognized statistical rating organizations in the United States until 2003.
However, there are more than one hundred other rating agencies at the international level, of which, according to the Wiki Ratings organization, 118 are currently active; of these, only nine are approved and recognized by the US Securities and Exchange Commission.
These NRSROs ( Nationally Recognized Statistical Rating Organization ) are: A.M. Best Rating Services Inc, DBRS Inc, Egan-Jones Ratings Company, Fitch Ratings Inc, HR Ratings de México S.A. de C.V., Japan Credit Rating Agency Ltd, Kroll Bond Rating Agency Inc, Moody’s Investors Service Inc and Standard & Poor’s Global Ratings.
Here we will give you the most important information about each one, leaving out the most common 3 (Fitch Ratings, Moody’s and S&P).
It was founded in the year of 1899, which makes it the first credit agency in the world. Like its strongest competitors, AM Best is headquartered and originated in New York City and does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.
On July 2, 2019, Morningstar, Inc. completed its acquisition of DBRS. The combination of DBRS strong market presence in Canada, Europe and the US, with the presence of Morningstar Credit Ratings in the US, has provided investors with an enhanced platform with thought leadership, analysis and research.
The American company was founded years later in 1995 with the purpose of issuing accurate and timely ratings. The company quickly gained credibility by pointing out the failings of Enron and WorldCom, and has since established itself as a leading global provider of credit ratings.
This company is one of the two active Mexican rating agencies with Verum. HR Ratings began its trajectory in a difficult year. In 2007 there was a global economic crisis that left rating agencies with a bad reputation. However, HR has become a reliable alternative for investors and today they issue ratings on stock issues in Mexico and abroad, which add up to more than 500 billion pesos in total.
The Japanese rating agency was founded in April 1985 and since that year it has maintained its independence despite having gone through difficult times such as the bursting of the real estate bubbles in Japan, the Asian financial crisis, the European sovereign debt crisis and the tsunamis from eastern Japan.
KBRA was established by Jules Kroll in 2010 in New York City. Since then, the brand has created new standards to assess risk and offer timely ratings in the American and European market.
In contrast, in Mexico the National Banking and Securities Commission supervises only 6 of these institutions mentioned in the country (excluding Verum) within the framework of the Securities Market Law and the General Law of Mercantile Companies. These are Fitch México, S&P Global Ratings, Moody’s de México, HR Ratings de México, Verum, DBRS and AM Best.
Keep learning with PR1ME Capital
Previously we discovered the origin, evaluation procedures and competitive differences of the Risk Rating Agencies and we understood that for companies, having a good rating is vital in order to find new investors who want to give a part of their capital to the development of the organization.
With the necessary information, the agencies carry out an exhaustive analysis of the key factors for the rating , such as financial reports, information from the private and public sector and the company’s performance over long periods.
What will we talk about next week? Don’t miss our next content from PR1ME Capital.