Fitch Ratings
Encyclopedia
The Fitch Group is a majority-owned subsidiary of FIMALAC
, headquartered in Paris. Fitch Ratings, Fitch Solutions and Algorithmics
, are part of the Fitch Group.
Dual-headquartered in New York and London with 51 offices worldwide, Fitch Ratings positions itself as a global rating agency
dedicated to providing value beyond the rating through independent and prospective credit opinions, research and data. Fitch Ratings was one of the three Nationally Recognized Statistical Rating Organization
s (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's
and Standard & Poor's
. It is one of the "Big Three credit rating agencies
" (Standard & Poor's, Moody's Investor Service and Fitch Ratings).
The firm was founded by John Knowles Fitch
on December 24, 1913 in New York City as the Fitch Publishing Company. It merged with London-based IBCA Limited in December 1997. In 2000 Fitch acquired both Chicago-based Duff & Phelps
Credit Rating Co. (April) and Thomson Financial
BankWatch (December). Fitch Ratings is the smallest of the "big three" NRSROs, covering a more limited share of the market than S&P and Moody's, though it has grown with acquisitions and frequently positions itself as a "tie-breaker" when the other two agencies have ratings similar, but not equal, in scale.
In September 2011, Fitch Group announced the sale of Algorithmics (risk analytics software) to IBM for $387 million. The deal closed on October 21, 2011.
Stephen W. Joynt is chief executive officer
.
Investment grade
Non-investment grade
(CDO) market that occurred despite being assigned top ratings by the CRAs. For instance, losses on $340.7 million worth of collateralized debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated AAA by Fitch.
However, differently from the other agencies, Fitch has been warning the market on the constant proportion debt obligations (CPDO) with an early and pre-crisis report highlighting the dangers of CPDO's.
FIMALAC
FIMALAC is a French credit rating and risk management corporation.-Biography:FIMALAC was created by Marc Ladreit de Lacharrière in 1991. He serves as the CEO, and holds 100% of the shares of the Fimalac Group, that holds ~80% of Fimalac. It is headquartered in Paris...
, headquartered in Paris. Fitch Ratings, Fitch Solutions and Algorithmics
Algorithmics Inc.
Algorithmics is a Toronto, Ontario based company founded by Ron Dembo that provides risk management software to financial institutions. Founded in 1989, Algorithmics employs over 850 people in 23 global offices, and serves more than 350 clients, including 25 of the 30 largest banks in the world,...
, are part of the Fitch Group.
Dual-headquartered in New York and London with 51 offices worldwide, Fitch Ratings positions itself as a global rating agency
Credit rating agency
A Credit rating agency is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves...
dedicated to providing value beyond the rating through independent and prospective credit opinions, research and data. Fitch Ratings was one of the three Nationally Recognized Statistical Rating Organization
Nationally Recognized Statistical Rating Organization
A Nationally Recognized Statistical Rating Organization is a credit rating agency that issues credit ratings that the U.S. Securities and Exchange Commission permits other financial firms to use for certain regulatory purposes...
s (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
and Standard & Poor's
Standard & Poor's
Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...
. It is one of the "Big Three credit rating agencies
Big Three (credit rating agencies)
The Big Three credit rating agencies are Standard & Poor's , Moody's, and Fitch Group. S&P and Moody's are US-based, while Fitch is dual-headquartered in New York City and London, and is controlled by the France-based FIMALAC. The European Union has considered setting up a state-supported EU-based...
" (Standard & Poor's, Moody's Investor Service and Fitch Ratings).
The firm was founded by John Knowles Fitch
John Knowles Fitch
John Knowles Fitch was the founder of the Fitch Publishing Company, and developed a financial securities rating system from AAA to D...
on December 24, 1913 in New York City as the Fitch Publishing Company. It merged with London-based IBCA Limited in December 1997. In 2000 Fitch acquired both Chicago-based Duff & Phelps
Duff & Phelps
Duff & Phelps Corporation a publicly traded financial advisory and investment banking firm, providing services principally in the areas of valuation, transactions, financial restructuring, dispute and taxation...
Credit Rating Co. (April) and Thomson Financial
Thomson Financial
Thomson Financial was an arm of The Thomson Corporation, which was one of the world's leading information companies, focused on providing integrated information solutions to business and professional customers...
BankWatch (December). Fitch Ratings is the smallest of the "big three" NRSROs, covering a more limited share of the market than S&P and Moody's, though it has grown with acquisitions and frequently positions itself as a "tie-breaker" when the other two agencies have ratings similar, but not equal, in scale.
In September 2011, Fitch Group announced the sale of Algorithmics (risk analytics software) to IBM for $387 million. The deal closed on October 21, 2011.
Stephen W. Joynt is chief executive officer
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
.
Long-term credit ratings
Fitch Ratings' long-term credit ratings are assigned on an alphabetic scale from 'AAA' to 'D', first introduced in 1924 and later adopted and licensed by S&P. (Moody's also uses a similar scale, but names the categories differently.) Like S&P, Fitch also uses intermediate +/- modifiers for each category between AA and CCC (e.g., AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, etc.).Investment grade
- AAA : the best quality companies, reliable and stable
- AA : quality companies, a bit higher risk than AAA
- A : economic situation can affect finance
- BBB : medium class companies, which are satisfactory at the moment
Non-investment grade
- BB : more prone to changes in the economy
- B : financial situation varies noticeably
- CCC : currently vulnerable and dependent on favorable economic conditions to meet its commitments
- CC : highly vulnerable, very speculative bonds
- C : highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
- D : has defaulted on obligations and Fitch believes that it will generally default on most or all obligations
- NR : not publicly rated
Short-term credit ratings
Fitch's short-term ratings indicate the potential level of default within a 12-month period.- F1+ : best quality grade, indicating exceptionally strong capacity of obligor to meet its financial commitment
- F1 : best quality grade, indicating strong capacity of obligor to meet its financial commitment
- F2 : good quality grade with satisfactory capacity of obligor to meet its financial commitment
- F3 : fair quality grade with adequate capacity of obligor to meet its financial commitment but near term adverse conditions could impact the obligor's commitments
- B : of speculative nature and obligor has minimal capacity to meet its commitment and vulnerability to short term adverse changes in financial and economic conditions
- C : possibility of default is high and the financial commitment of the obligor are dependent upon sustained, favourable business and economic conditions
- D : the obligor is in default as it has failed on its financial commitments.
Criticism
Credit rating agencies such as Fitch Ratings have been subject to criticism in the wake of large losses in the collateralized debt obligationCollateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
(CDO) market that occurred despite being assigned top ratings by the CRAs. For instance, losses on $340.7 million worth of collateralized debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated AAA by Fitch.
However, differently from the other agencies, Fitch has been warning the market on the constant proportion debt obligations (CPDO) with an early and pre-crisis report highlighting the dangers of CPDO's.