Fitch Ratings Inc. is an American

credit rating agency A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of Default (finance), default ...

and is one of the " Big Three credit rating agencies", the other two being

Moody's Moody's Investors Service, often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its historical name. Moody's Investors Service provides international ...

and

Standard & Poor's S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is con ...

. It is one of the three

nationally recognized statistical rating organization A nationally recognized statistical rating organization (NRSRO) is a credit rating agency (CRA) approved by the U.S. Securities and Exchange Commission (SEC) to provide information that financial firms must rely on for certain regulatory purp ...

s (

NRSRO A nationally recognized statistical rating organization (NRSRO) is a credit rating agency (CRA) approved by the U.S. Securities and Exchange Commission (SEC) to provide information that financial firms must rely on for certain regulatory purpos ...

) designated by the

U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

in 1975.551

History

Fitch Ratings is dual headquartered in New York and

London London is the capital and largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary down to the North Sea, and has been a majo ...

. Hearst owns 100 percent of the company following its acquisition of an additional 20 percent for $2.8 billion on April 12, 2018. Hearst had owned 80 percent of the company after increasing its ownership stake by 30 percent on December 12, 2014, in a transaction valued at $1.965 billion. Hearst's previous equity interest was 50 percent following expansions on an original acquisition in 2006. Hearst had jointly owned Fitch with

FIMALAC FIMALAC (known as Financière Marc de Lacharrière) is a French holding company focusing on credit rating and risk management companies. It manages commercial real estate through North Colonnade Ltd, and private equity funds through its subsidiar ...

SA, which held 20 percent of the company until the 2018 transaction. Fitch Ratings and Fitch Solutions are part of the Fitch Group. The firm was founded by John Knowles Fitch on December 24, 1914, in New York City as the Fitch Publishing Company. In 1989, the company was acquired by a group including

Robert Van Kampen Robert D. Van Kampen (1938–1999) was an American businessman, who served as a member of various organizational boards in the business world and Christian ministry. Van Kampen's business career took him into the investment banking world, and he b ...

. In 1997, Fitch was acquired by

and was merged with London-based IBCA Limited, a FIMALAC subsidiary. In 2000 Fitch acquired both Chicago-based

Duff & Phelps Kroll, LLC, formerly Duff & Phelps LLC, is an American multinational financial consultancy firm based in New York City. It was founded as Duff & Phelps in 1932 by William Duff and George Phelps. Since then, the firm has added more than 30 comp ...

Credit Rating Co. (April) and

Thomson Financial Thomson Financial was an arm of the Thomson Corporation, an information provider. When the Thomson Corporation merged with Reuters to form Thomson Reuters in April 2008, Thomson Financial was merged with the business of Reuters to form the Market ...

BankWatch (December). Fitch Ratings is the third largest

rating agency, 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 Algorithmics is the systematic study of the design and analysis of algorithms. It is fundamental and one of the oldest fields of computer science. It includes algorithm design, the art of building a procedure which can solve efficiently a specific ...

(risk analytics software) to IBM for $387 million. The deal closed on October 21, 2011. In June of 2022, Fitch Group acquired GeoQuant, a AI-driven data and technology company.

Investment scale

Fitch Ratings' long-term

credit rating A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. ...

s are assigned on an alphabetic scale from 'AAA' to 'D', first introduced in 1924 and later adopted and licensed by S&P. 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 Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

or in

arrears Arrears (or arrearage) is a legal term for the part of a debt that is overdue after missing one or more required payments. The amount of the arrears is the amount accrued from the date on which the first missed payment was due. The term is usually ...

, 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, favorable business and economic conditions * D : the obligor is in default as it has failed on its financial commitments.

Fitch Solutions

Launched in 2008, Fitch Solutions offers a range of fixed-income products and professional development services for financial professionals. The firm also distributes Fitch Ratings' proprietary credit ratings, research, financial data, and analytical tools.

Criticism

The main

credit rating agencies A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default. An agency may ra ...

, including Fitch, were accused of misrepresenting the risks associated with mortgage-related securities, which included the CDO market. There were large losses in the

collateralized debt obligation A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS).Lepke ...

(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 Credit Suisse Group AG is a global investment bank and financial services firm founded and based in Switzerland. Headquartered in Zürich, it maintains offices in all major financial centers around the world and is one of the nine global " ...

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 obligation A Constant proportion debt obligation (CPDO) is a type of credit derivative sold to investors looking for exposure to credit risk. A CPDO is normally embedded in a note rated by a credit rating agency. CPDOs employ dynamic leveraging in a similar (b ...

s (CPDO) with an early and pre-crisis report highlighting the dangers of CPDO's.

References

External links

Fitch Ratings

Fitch Solutions

Fitch Learning

{{Authority control Credit rating agencies Financial services companies established in 1914 Financial services companies of the United States Companies based in New York City Financial services companies based in New York City 1914 establishments in New York City