Moody’s is one of the most famous rating agencies in in the world. A credit rating agency (CRA) is a company that rates a debtor's ability to timely pay back debt along with interest. It also assesses the likelihood of default. Credit worthiness of borrowers is mentioned using standardized rating scale which provides an easy comparison tool for investors. The group of three rating agencies, Moody’s, Standard and Poor’s and Fitch Group together is called Big Three credit rating agencies. Of these three, the first two together manages around 80% of rating services of entire world.
The company was founded in 1909 by John Moody. The objective of the company was producing statistical manuals relating to stocks and bonds and bond ratings. The U S U.S. Securities and Exchange Commission identified as a Nationally Recognized Statistical Rating Organization (NRSRO) in 1975. For decades Dun & Bradstreet was the owner of the company. In 2000, the Moody's Investors Service became a separate company and Moody's Corporation was established as a holding company. Moody’s have presence over 41 countries. The company employs 11,700 employees. It had an income of $ 3.6 billion in 2016.
Moody's Investors Service is commonly n referred to as Moody's. The credit rating business of the group is being handled by this agency. This is responsible to carry out credit ratings and research of debt instruments and securities. The other agency coming under the group is Moody’s Analytics. It offers advanced advisory services and research for credit and economic analysis and financial risk management.
As of now, Moody's is an essential component of global capital markets. The credit ratings, research, tools and analysis provided by Moody’s and similar rating agencies have contributed for the development and integration of global financial markets.
A credit rating agency employs transparent methods for rating of credit worthiness of issuers of debt and debt instruments. The CRAs rate debts securities in several bond market segments. Government bonds, municipal and corporate bonds, money market funds, fixed income funds etc are the most commonly rated bonds. They also conduct sovereign rating of countries and financial institution rating of banks and non-bank finance companies.
The ratings are envisaged only as a tool to take prudent investment decisions by investors. It provides a simple and transparent gradation system with regard to the future creditworthiness of securities. The CRA agencies always provide warning to the effect that the rating should not be considered as a recommendation to invest.