Notes for Level I CFA® Program

R55 Fundamentals of Credit Analysis

4. Rating Agencies, Credit Rating and Their Role in Debt MarketsWatch Video Play


Moody’s, S&P, and Fitch are the three main rating agencies. At least two of these agencies assign a rating to the majority of the bonds. The credibility/dominance of the rating agencies is because of:

  • Their independent assessment of credit risk.
  • Ease of comparison across bond issuers and issues.
  • Regulatory and statutory reliance and usage.
  • Issuer payment for ratings: This is controversial as some believe the rating may be biased as it creates a conflict of interest between the issuer, investor and the rating agency.
  • Growth of debt markets.