Which is the more authoritative rating report from S&P, Moody's or Fitch?

Highlights Aug.29,2022 07:41

"The world is flat" Friedman once said: "There are two superpowers on the earth, one is the United States and the other is a rating agency. The United States can destroy a country with bombs, and rating agencies can destroy a country with bonds; both Who is powerful is not necessarily." This shows the influence of rating agencies in the world.

Why are rating agencies so good?
First of all, a rating agency is a social intermediary agency engaged in credit rating business, and itself is a credit rating organization that brings together top experts in the fields of economy, law, and finance. As long as you issue securities, the credit rating of the rating agency will inevitably affect you, which in turn affects the decision-making of investors.

Secondly, when the United States has supervised financial institutions for many years, it usually strongly requires insurance companies, pensions and other institutions to invest prudently, and expressly stipulates that they cannot invest in high-risk bonds. At this time, credit rating, as the only criterion for assessing credit risk, becomes irreplaceable. Every move of the rating agencies affects the bond market.

In addition, rating agencies have repeatedly been recognized by international authorities. The U.S. Securities and Exchange Commission (SEC) recognized the three major rating agencies in 1975. Moody’s, Standard & Poor’s, and Fitch are the U.S. Nationally Recognized Statistical Rating Organizations (NRSRO). The NRSRO rating results are incorporated into the U.S. securities exchange regulations.

Last but not least is the trust from investors and the bond market. Trust is the capital of these rating agencies.

S&P, Fitch, Moody's dominate the market
Apart from Moody's, S&P and Fitch, the influence of other rating agencies in the market is quite limited. Bonds rated by the three major rating agencies usually have certain security guarantees, so their authority occupies a certain degree of voice in the capital market. The main business of the three rating agencies accounts for more than 95% of the market share, and by opening branches around the world, they have controlled or acquired other rating agencies, and have always served as a bridge for overseas bond issuance in China. The three institutions have a history of nearly 100 years (Standard & Poor's in 1860, Fitch in 1913, Moody's in 1909). The century-old foundation also allows the three institutions to have a large amount of historical data on bond products. These historical data are very valuable to investors. huge.

Rating Criteria of the Three Agencies
Credit ratings are divided into two categories: long-term and short-term. The following are the rating standards of the three institutions:

A. Standard & Poor's
Standard & Poor's long-term ratings are divided into investment grade and speculative grade.