Moody’s Corporation is an American company which provides financial services. The company primarily holds two major subsidiaries, namely Moody’s Investor Services and Moody’s Analytics. Moody’s Investor Services is a credit rating agency and Moody’s Analytics deals with software and services related to financial analysis. This article is majorly focused on the details of Moody’s Investor Services.
Moody’s has its headquarters in New York City, United States. The company is listed on the New York Stock Exchange. The company has reported a revenue close to US$3000 million in the year 2013. The company has more than 10000 employees. Mr. Raymond W. McDaniel Jr. is the present CEO of Moody’s.
Moody’s Investors Service which is into bond credit rating, is loosely referred to as Moody’s. The agency rates fixed income debt securities. It assigns the ratings on the basis on the basis of assessed risk and the borrower’s ability to make interest payments which are watched and followed by many investors. Moody’s is considered as one of the Big Three credit rating agencies along with Fitch Group and Standard & Poor’s.
John Moody founded the organization in 1909 as producer of manuals of stocks and bond related statistics. The U.S. Securities and Exchange Commission made Moody’s a Nationally Recognized Statistical Rating Organization (NRSRO) in 1975. It was acquired by Dun & Bradstreet in 1962 and separated as a spun off in 2000. In 2007 the two operating divisions of Moody’s were formed.
A certain level of credit rating is required for many institutions from an NRSRO entity in order to buy a given issue. The rating also impacts the capital requirements that the Securities and Exchange Commission applies to banks in the United States.
According to Moody’s, the purpose of its ratings is to “provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged”.
Moody’s Provide bond-related financial research issued by the government and financial entities. The agency uses a standardized rating scale to rate the borrower’s credit worthiness. It helps the expected investor loss in the case of any default. The ratings are scales from Ass to C, with C being the lowest quality and Aaa the highest quality.
The company acts as a provider of supplementary credit analysis and influence the capital markets. This kind of analysis is particularly used by small and less complicated investors. The lending companies and investors use these rating to decide their business.
Credit rating agencies like Moody’s, S&P and Fitch were under the heat for their role in the subprime crisis of 2008. The focus of the criticism was on the AAA rating given to the mortgage-backed securities comprising of subprime loans.
Moody’s in India
The headquarters of Moody’s India is situated in Mumbai. In India Moody’s functions are limited to publishing research reports and credit worthiness related to large organizations and the country as a whole. Moody’s credit rating for India was the last set at Baa3 which is used by sovereign wealth funds, pension funds, and other investors to gauge the credit worthiness of India thus having a big impact on the country’s borrowing costs.
Although credit rating is relatively a new concept in India, players like Moody’s and Fitch are catching up. CRISIL is the largest rating agency active in India having more than 60% of market share.