Credit Rating Agencies

A credit rating agency evaluates the credit worthiness of an individual, corporation, or even a country. The credit rating that they receive is considered from the financial past and current assets and liabilities. Naturally, a credit rating informs a lender or investor the prospect of the subject being able to pay back a loan. The credit rating of a corporation is a financial pointer to possible investors of debt securities such as bonds. These are assigned by credit rating agencies such as Standard & Poor’s, Moody’s or Fitch.

When the word ‘superpower’ is mentioned one thinks of the United States and more recently China. However in the financial world the credit rating agency Moody’s seems to have fallen under this banner. Along with its rivals Standard & Poor and Fitch, Moody’s exert significant pressure in the financial markets. Since these agencies assess risk they are the semi-official forecasters of how all the big companies and indeed governments will perform. Subsequently it is not surprising that the rating agencies have been criticised for their role in the recent credit crisis.

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