Ratingbureaus

Rating bureaus, or credit rating agencies, are private firms that assess the creditworthiness of borrowers and financial instruments and publish credit ratings. A rating represents an opinion about the probability that the issuer will repay debt on time, based on financial condition, cash flow, governance, and external factors.

They issue long-term ratings for issuers and debt, short-term ratings for short-term obligations, and provide outlooks or watches signaling potential rating changes. Each agency uses its own scale and methodology, but all rate on a ladder from high-grade to default for various categories, including sovereign, corporate, and structured finance.

Ratings influence borrowing costs and investment decisions. Investors use ratings to assess risk and allocate capital; banks and regulators may use ratings for risk weighting and market conduct. Ratings are opinions, not guarantees, and can be revised or withdrawn as conditions change.

Regulation and oversight vary by jurisdiction. In the United States, major rating bureaus are registered with the SEC and subject to governance and disclosure requirements; the Dodd-Frank Act introduced reforms addressing conflicts of interest. In the European Union, CRAs are regulated and supervised under specific rules. Critics point to conflicts of interest, reliance on issuer-paid models, and historical rating failures, driving calls for greater transparency.

Prominent rating bureaus include Standard & Poor's Global Ratings, Moody's Investors Service, and Fitch Ratings. The field continues to evolve with stricter regulation, new methodologies, and stronger emphasis on transparency and resilience in financial markets.