1. CREDIT
RATING
AGENCIES

2. PRESENTED BY
•Karishma Sabhani
•Rahul Chawla

4. What Is Credit Rating ?
An assessment of the credit
worthiness of individuals and
corporations. It is based upon the
history of borrowing and repayment,
as well as the availability of assets
and extent of liabilities.

5. Credit Rating Agencies
A Credit rating agency (CRA) is a company
that assigns Credit ratings for issuers of certain
types of debt obligations as well as the debt
instruments themselves. In some cases, the
servicers of the underlying debt are also given
ratings.

6. The General Phenomenon
The relation between interest and period of
12
I 10
N
T 8
E 6
R
E 4
S
2
T
0
10 Years 20 Years 30 Years 40 years
PERIOD

7. The Relation Between Interest And The Rating Of The Bond
12
I 10
N
8
T
E 6
R
E 4
S
R 2
0
strongest strong weak weakest
RATING OF BONDS

8. Uses of Credit Ratings

9. By The Bond Issuers
an independent verification of their own
credit-worthiness.
Issuers also use credit ratings in
certain structured finance transactions.
Advantage of credit rating advisory
services.

10. By The Govt. Regulators
Used for several regulatory purposes .
Role in capital formation too

11. By The Structured Finance
 determines the interest rate or price
ascribed to a particular tranche, based on
the quality of loans or quality of assets
contained within that grouping.
help them determine how to structure the
individual tranches so that each receives a
desired credit rating

12. List Of Credit Rating Agencies
Credit Rating
ONICRA Credit Rating
Information Services of
Agency of India Ltd.
India Limited (CRISIL)
In India :-
Investment Information Credit Analysis &
and Credit Rating Research Limited
Agency of India (ICRA) (CARE)

13. Moody’s
Investor’s
service
Standard
A.M. Best
and
Company, I
poor's(S&P
nc.
)
Globally
TheStreet.c
Fitch ratings om
ltd. Ratings, Inc
.
Egan-Jones
Rating
Company

14. Types & Meaning Of The Ratings
AAA: An obligor rated 'AAA' has extremely strong
capacity to meet its financial commitments. 'AAA' is the
highest
AA: An obligor rated 'AA' has very strong capacity to
meet its financial commitments. It differs from the
highest-rated obligors only to a small degree.
A: An obligor rated 'A' has strong capacity to meet its financial
commitments but is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligors in higher-rated categories

15. BBB : adverse economic conditions or changing
circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial
commitments
BB: An obligor rated 'BB' is less vulnerable in the
near term than other lower-rated obligors. However, it
faces major ongoing uncertainties.
B:. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to
meet its financial commitments.

16. An obligor rated 'CCC' is currently vulnerable, and is dependent upon
favorable business, financial, and economic conditions to meet its financial
commitments.
R: An obligor rated 'R' is under regulatory supervision owing to its
financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one class of
obligations over others
SD and D: An obligor rated 'SD' (selective default) or 'D' has failed to
pay one or more of its financial obligations (rated or unrated) when it
came due.
A 'D' rating is assigned when It is believed that the default will be a
general default and that the obligor will fail to pay all or substantially all
of its obligations as they come due.

18. Credit Rating Of Different
Countries By Standard And
Poor's

19. Different Credit ratings By
Different Agencies
Moody's Standard & Poor's Fitch IBCA
Gilt edged. If
everything that can go
Aaa AAA AAA wrong does go wrong,
they can still service
debt.
Very high quality by all
Aa AA AA
standards.
Investment grade; good
A A A
quality.
Lowest investment-
grade rating;
Baa BBB BBB
satisfactory, but needs
to be monitored.

20. Somewhat speculative;
Ba BB BB
low grade.
B B B Very speculative.
Even more speculative.
Caa CCC CCC
Substantial risk.
Wildly speculative.
Ca CC CC
May be in default.
C C C In default. Junk.

21. The Process Followed By The Raters
Request received for rating
Pre-Analysis and
Document Collection
Assignment finalized and detailed
questionnaire prepared
Customer and referral
feedback collected

22. In-depth Analysis of Business
Unit
Site Visit scheduled and
Data Collected
Draft Report and
Rating proposal
Report evaluation by
Rating committee
Final evaluation and
Rating given

23. Methodologies

24. Effect Of Credit Ratings on
Bond Evaluation
Investors generally rely on bond ratings
Regular change in the rating of long term
Bonds
Rating effecting the
price of bonds

25. Effect of credit rating on
countries
Downgrade
of
united
states

27. Credit Rating Agencies Do Not Downgrade
Companies Promptly Enough
Large Corporate Rating Agencies Have Been
Criticized For Having Too Familiar A Relationship
With Company Management
 CRA’s Have Also Been Accused Of Engaging In
Heavy-handed "Blackmail" Tactics In Order To
Solicit Business From New Clients, And Lowering
Ratings For Those Firms

28. Agencies are sometimes accused of
being oligopolists,
Credit Rating Agencies have made errors of
judgment in rating structured products

29. THANK YOU