International Credit Rating Agencies

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..... International Credit Rating Agencies
By: - YAGAY andSUN
Corporate Laws / IBC / SEBI
Dated:- 26-4-2025
.🌍 International Credit Rating Agencies Sure! Here's a comprehensive overview of International Credit Rating Agencies, covering their introduction, formation, role, importance, scope of work, governing standards, and a solid conclusion 📌 Introduction International Cr .....

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..... edit Rating Agencies (CRAs) assess the creditworthiness of sovereigns, corporations, financial institutions, and financial instruments across the globe. These agencies help global investors evaluate the risk associated with investing in various countries and companies, thereby enhancing financial transparency and efficiency in international capital markets. 🏛️ Formation & Evolution .....

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..... The concept of credit rating originated in the United States in the early 20th century to evaluate railroad bonds. Over time, as global financial markets expanded, a few agencies emerged as global leaders. 🔹 Major International Credit Rating Agencies: Agency Country Year Established Global Standing Standard & Poor's (S&P) USA 1860 Among top 3 globally Moody's Investors Service .....

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..... USA 1909 Among top 3 globally Fitch Ratings USA/UK 1914 Among top 3 globally DBRS Morningstar Canada/USA 1976 Strong in North America Scope Ratings Germany 2002 Leading European agency Japan Credit Rating Agency (JCR) Japan 1985 Dominant in Asia Dagong Global (suspended) China 1994 (Under regulatory review) Together, S&P, Moody's, and Fitch are known as the "Big Three". &# .....

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..... 127919; Role of International Credit Rating Agencies * Assessing Sovereign & Corporate Risk: * Provide ratings to governments and private issuers for their bonds and financial obligations. * Facilitating Global Capital Flow: * Help investors identify low-risk vs. high-risk countries and sectors. * Promoting Market Discipline: * Ratings influence borrowing costs, encouraging fiscal and .....

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..... financial discipline. * Risk Benchmarking: * Used by banks, funds, and regulators for Basel norms, investment decisions, and exposure limits. ⭐ Importance in Global Markets Contribution Description Investor Confidence Ratings act as a quick gauge of financial soundness. Global Investment Decisions Sovereign ratings affect FDI and FPI inflows. Credit Risk Premium Affects interes .....

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..... t rates and yield spreads. Policy Impact Downgrades can force countries to implement reforms or austerity measures. 🧾 Scope of Work International CRAs rate: * Sovereign debt (e.g., India, USA, Brazil) * Corporate bonds & loans * Banks & financial institutions * Structured finance instruments * Municipal bonds * Green bonds & ESG-linked instruments * Insurance companies an .....

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..... d pension funds 🏛️ Governing & Regulatory Framework While these agencies operate globally, they are regulated primarily in their home countries: * USA: Regulated by SEC under the Credit Rating Agency Reform Act, 2006 * EU: Regulated by European Securities and Markets Authority (ESMA) * Basel Committee: Uses credit ratings for risk-weighted asset calculations under Basel III .....

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..... norms * IOSCO: Sets voluntary international code of conduct for CRAs ⚖️ Post-2008 Financial Crisis Reforms After the global financial crisis-where CRAs were blamed for overrating toxic assets-regulatory oversight increased: * Mandatory disclosure of rating methodologies * Rotation of analysts * Enhanced surveillance and penalties for bias or negligence 🔍 Rating Scal .....

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..... e Example (S&P): Rating Meaning AAA Prime, highest quality AA High quality A Strong BBB Investment grade BB and below Speculative or "junk" grade ✅ Conclusion International Credit Rating Agencies are gatekeepers of global credit markets, playing a critical role in shaping sovereign borrowing costs, investor sentiment, and capital allocation. However, their accuracy, transparenc .....

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..... y, and independence have come under scrutiny, especially in light of financial crises and geopolitical influences. Going forward, global CRAs must: * Diversify perspectives (not just Western-centric) * Improve predictive quality * Ensure accountability and reduce conflicts of interest Simultaneously, emerging economies like India must develop strong domestic rating ecosystems to complement .....

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..... international ratings and reduce external dependency.
Scholarly articles for knowledge sharing by authors, experts, professionals .....

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