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Fitch Ratings Scale


Fitch Ratings Inc. in an international credit rating agency.

Together with Moody's and Standard & Poors, Fitch is one of the largest credit rating agencies in the world.

Fitch Rating was founded in 1913.

Credit rating agencies make risk assessments of financial instruments like:

  • Government bonds
  • Big corporations bonds
  • Preferred stocks
  • Mortgage backed instruments

Scale

Credit Ratings give an asessment to financial instruments. For example, an “investment grade” asset can have the following ratings:

  1. AAA The highest rating.
  2. AA
  3. A
  4. BBB

Fitch uses the symbols + and - to make smaller adjustment to it's ratings. For example, AA+ is better than AA.

A credit rating is an assessment of the financial capacity of an entity (corporation or government institution) to pay it's financial obligations. Common stocks do not constitute debt: they are not subject of credit ratings. Credit ratings apply to debt securities like bonds.

Credit ratings can be applied also to:

  • Corporations
  • National governments
  • Financial institutions
  • Insurance companies
  • Municipalities

It is considered that an institution with a better rating (AAA) has a lower default risk than an institution with a worse rating (BBB).

Fitch Rating Scale:

Investment Grade:

  • AAA: the best grade. This grade is given to stable and reliable companies. As of 2018, in US only Microsoft and Johnson & Johnson are rated AAA
  • AA: these are quality companies that have very strong capacity to meet it's financial obligations but a little more riskier that AA companies.
  • A: Strong capacity to meet it's obligations. This capacity may be more vulnerable to changes in economic conditions.
  • BBB: these are medium class companies. There is a low expectation of interrupted payments, but changes in circumstances are more likely to impact it's capacity.

Non-investment grade The probability that the company will repay it's debt is deemed to be speculative.

  • BB: company's payment capacity is prone to changes in the economy.
  • B: the financial situation of the company varies noticeably.
  • CCC: the current situation of the company is vulnerable. The company depends on favorable conditions to meet it's commitments.
  • CC: very vulnerable
  • C: the company or issuer can be in bankrupcy, but it's still paying it's obligations.
  • D: the company has defaulted, and Fitch believes it will default most of the future obligations.
  • NR; Not Rated

Fitch ratings for selected countries:

  • Light blue represent countries with good ratings
  • Violet represents countries with ratings near to BBB
  • Red represents countries with bad credit ratings (CCC)

See also

Discussion

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en/fitch-ratings.txt · Last modified: 2018/08/01 07:43 by federico