Credit Rating Agencies Essay
1.1 Credit Rating Agencies:
A credit rating agency (CRA) is a firm that assigns credit ratings, which rate a firm’s ability to pay back debt by making timely interest payments and the likelihood of default. An agency gives the creditworthiness of issuers’ debt, but not of individual consumers. The debt instruments rated by CRAs may include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, and collateralized securities, such as mortgage-backed securities and collateralized debt obligations.
The debt or securities may be issued by private or limited companies, state or local governments, non-profit organizations, or sovereign nations. A credit rating facilitates the trading of securities on a secondary market. The credit
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CRAs have special departments to carry on research and development work of the industries. They provide training to the employees and executives of the companies for better management. They examine the risk involved in a new project, pan out plans and thus reduce the percentage of risk to a great extent. For this they carry on thorough research into the respective industry. They have started offering services to the mutual fund sector through the application of fund utilization services. The main industries presently rated by the credit rating agencies include agriculture, health care industry, infrastructure, and maritime …show more content…
The registration procedure includes application for the establishment of a credit rating agency, matching the eligibility criteria and providing all the details required. They have to undergo the strict examination procedure with regard to the details furnished by them. They are required to prepare internal procedures, abidance with circulars. They are offered guidelines regarding the credit rating procedure, by the Act. The credit rating agencies are provided with compliance officers. They are required to show their accounting
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