Moody's Ratings

Moody's Ratings is the credit-rating division of Moody's Corporation. It evaluates the creditworthiness of governments, companies, financial institutions, municipalities, investment funds and structured-finance instruments, publishing ratings, research and related credit-risk analysis for investors and other market participants. Together with S&P Global Ratings and Fitch Ratings, it is commonly described as one of the Big Three international credit-rating agencies. The business traces its origins to John Moody's 1900 publication of a statistical manual covering industrial and miscellaneous securities. After the Panic of 1907 forced the sale of his first business, Moody returned in 1909 with a publication devoted to railroad bonds and subsequently expanded coverage to industrial companies, utilities and public-sector borrowers. The firm introduced a widely distributed letter-based bond-rating system and incorporated as Moody's Investors Service in 1914. By the 1920s it covered most of the United States bond market, including state and local government debt. Moody's became part of Dun & Bradstreet in 1962 but continued to operate substantially as a separate analytical business. Its role expanded as commercial paper, bank deposits, international bonds and structured-finance products became increasingly important. In 1975, the U.S. Securities and Exchange Commission recognized Moody's as a Nationally Recognized Statistical Rating Organization, a designation that allowed its ratings to be used for certain regulatory purposes. The company opened offices in major overseas markets from the 1980s onward, helping establish a global operating footprint. The Moody's business was separated from Dun & Bradstreet in 2000 through the creation of Moody's Corporation as a publicly traded holding company. During the following decade, structured finance became a major source of growth, particularly through ratings of mortgage-backed securities and collateralized debt obligations. The rapid deterioration of U.S. housing and credit markets exposed weaknesses in assumptions used for some structured products. Moody's made extensive downgrades during 2007 and faced criticism, litigation and regulatory scrutiny in the aftermath of the global financial crisis, as did its principal competitors. Moody's Ratings uses a scale ranging from Aaa, the highest-quality category, to C, the lowest category. Intermediate categories may receive numerical modifiers, with 1 representing the higher end of a rating category and 3 the lower end. Ratings are intended to provide a standardized indication of relative expected credit risk and loss severity; they are not presented as investment recommendations and do not directly predict market prices. The division also supplies research and opinions on sovereign, corporate, municipal, financial-institution, fund and structured-finance credit. It has expanded into climate and other risk data, including through Moody's controlling investment in Four Twenty Seven in 2019. On March 6, 2024, Moody's Investors Service was renamed Moody's Ratings, aligning the division's identity with the broader Moody's brand while preserving its role as a regulated credit-rating organization.

Moody's Ratings developed from John Moody's early financial publishing work. In 1900, John Moody issued Moody's Manual of Industrial and Miscellaneous Securities, a statistical reference covering securities and issuers across several sectors. The publication sold successfully, but the Panic of 1907 created a capital shortage that forced Moody to sell the business. In 1909, Moody returned with Analysis of Railroad Investments and a new company focused on railroad bonds. He broadened the publication in 1913 to cover industrial companies and utilities and used a letter-based system to communicate relative credit quality. The company was incorporated as Moody's Investors Service in 1914. Coverage of state and local government bonds was added in 1919, and by 1924 Moody's rated almost the entire U.S. bond market. The 1930s brought a closer connection between ratings and financial regulation. U.S. banking rules restricted investments in speculative securities by reference to recognized rating manuals, increasing the practical importance of agency opinions. Moody's later expanded into commercial paper and bank deposits. In 1962, Dun & Bradstreet acquired Moody's Investors Service, although the ratings operation continued to function with considerable analytical independence. During the 1970s and 1980s, the business model changed as rating agencies increasingly charged issuers as well as serving investors. This shift responded partly to the copying and redistribution of ratings, which had weakened the investor-subscription model. In 1975, the SEC recognized Moody's as an NRSRO. The liberalization and internationalization of capital markets then supported rapid geographic expansion, with offices established in Japan, the United Kingdom, France, Germany, Hong Kong, India and China between 1985 and 2001. Dun & Bradstreet spun off Moody's Investors Service in 2000, creating Moody's Corporation as its holding company. The following years saw strong growth in structured finance. Ratings of mortgage-backed securities and collateralized debt obligations became a substantial portion of revenue, but the assumptions behind some ratings were challenged when U.S. housing conditions deteriorated. Moody's issued large-scale downgrades in 2007 and, together with other agencies, faced criticism and investigations concerning models, conflicts of interest, issuer-paid ratings and the use of ratings in regulation. The agency has also faced disputes over unsolicited ratings and sovereign downgrades. Courts and regulators have considered whether ratings constitute protected opinions, whether unsolicited ratings create market-power concerns, and whether regulatory dependence on ratings contributes to pro-cyclical market behavior. Following the financial crisis, international institutions promoted reducing mechanical reliance on external ratings in laws and investment practices. In 2019, Moody's acquired a controlling interest in Four Twenty Seven, extending its risk-data capabilities into climate exposure. On March 6, 2024, Moody's Investors Service was rebranded Moody's Ratings. The current business remains a global provider of ratings and credit research across government, corporate, financial, municipal, fund and structured-finance markets.

• 2024

  Rebranded as Moody's Ratings

  [1]Moody's Ratingsen.wikipedia.org

  Moody's Investors Service adopted the Moody's Ratings name.

• 2024

  SEC initiates recordkeeping proceedings

  [3]SEC administrative order concerning Moody's Investors Servicesec.gov

  The SEC alleged that Moody's Ratings failed to preserve required communications concerning credit-rating activities and described widespread off-channel messaging.

• 2019

  Investment in Four Twenty Seven

  [1]Moody's Ratingsen.wikipedia.org

  Moody's acquired a controlling interest in climate-risk data company Four Twenty Seven.

• 2000

  Separation from Dun & Bradstreet

  [1]Moody's Ratingsen.wikipedia.org

  Moody's Corporation was established as a separate publicly traded holding company for the ratings business.

• 1975

  Recognized as an NRSRO

  [1]Moody's Ratingsen.wikipedia.org

  The U.S. SEC designated Moody's as a Nationally Recognized Statistical Rating Organization.

• 1962

  Acquired by Dun & Bradstreet

  [1]Moody's Ratingsen.wikipedia.org

  Dun & Bradstreet acquired Moody's Investors Service, which continued operating as a largely independent ratings business.

• 1919

  Municipal-bond coverage added

  [1]Moody's Ratingsen.wikipedia.org

  Moody's expanded its ratings to U.S. state and local government bonds.

• 1914

  Moody's Investors Service incorporated

  [1]Moody's Ratingsen.wikipedia.org

  The company adopted the Moody's Investors Service name and continued expanding its issuer and security coverage.

• 1909

  Return to financial publishing

  [1]Moody's Ratingsen.wikipedia.org

  John Moody founded a new company and published an analysis focused on railroad investments, reviving his financial-information business.

• 1909

  John Moody publishes an investment analysis guide

  [4]Moody's Investors Service company profilecrunchbase.com

  John Moody issued an analytical publication on railroad securities, establishing the foundation of the Moody's credit-information and investment-analysis business.

• 1900

  First Moody's securities manual

  [1]Moody's Ratingsen.wikipedia.org

  John Moody published a statistical manual covering industrial and miscellaneous securities, establishing the publishing roots of the ratings business.

A global, independent third-party provider of standardized credit opinions and credit-risk research for debt markets. A regulated, globally recognized credit-assessment provider whose ratings and research support fixed-income issuance, investment analysis, portfolio oversight, and market risk management.

• Credit assessment

  Credit ratings

  Opinions on the relative creditworthiness and expected loss characteristics of debt issuers and securities. Coverage includes sovereign, municipal, corporate, financial-institution, fund and structured-finance obligations. The principal long-term scale runs from Aaa to C, with numerical modifiers used for many intermediate categories. Opinions on the relative credit quality of debt issuers and instruments. Coverage spans governments, municipalities, corporations, banks, insurers, funds, and structured-finance transactions. Ratings are used to support issuance analysis, portfolio construction, risk limits, and ongoing surveillance, but represent analytical opinions rather than guarantees of repayment.

• Credit assessment · 1919

  Sovereign and public-sector ratings

  Ratings and research covering national governments, subnational authorities and public-sector borrowers. The analysis considers fiscal strength, economic structure, institutional capacity, debt burden and vulnerability to external or market shocks.

• Credit assessment

  Corporate and financial-institution ratings

  Credit opinions on companies, banks, insurers and other financial institutions. The work assesses business risk, financial policy, liquidity, capital adequacy, profitability, governance and the structure of particular debt instruments.

• Structured finance

  Structured-finance ratings

  Ratings and analysis for instruments whose repayment depends on pools of assets, contractual cash flows or special-purpose structures, including mortgage-backed securities and collateralized debt obligations. This became a major business area before the global financial crisis and remains part of the agency's coverage. Ratings and analysis for securitized and structured products, including transactions whose repayment depends on pools of financial assets, contractual cash flows, or other structural protections. The work involves transaction-specific methodologies, surveillance, and publication of relevant ratings information.

• Ratings data and research platform

  Moody's CreditView

  A Moody's platform for global capital-market users that incorporates credit ratings, research, and data from Moody's Investors Service together with research, data, and content from Moody's Analytics. It is designed to give users a consolidated environment for reviewing issuer credit information and related analytical material.

• Public-sector credit

  Sovereign and public-finance ratings

  Credit opinions covering national governments, sub-sovereign entities, municipalities, and other public-sector borrowers. Analysis may consider fiscal capacity, debt burden, economic conditions, institutional strength, revenue stability, and the legal or structural features of the relevant debt.

• 2024

  Alleged failures to preserve credit-rating communications

  The SEC's administrative order alleged widespread and longstanding failures to maintain or preserve messages relating to credit-rating activities, including off-channel communications involving employees at different seniority levels. The proceeding concerned regulatory recordkeeping obligations.

  Source

• 2011

  Sovereign-downgrade criticism

  Moody's faced public criticism from countries and market participants after sovereign downgrades, including Portugal during the European sovereign-debt crisis. Critics argued that downgrades could increase borrowing costs, while the agency characterized ratings as analytical opinions about credit risk.

  Source

• 2007

  Subprime and structured-finance rating controversy

  Moody's faced extensive criticism after high-rated mortgage-backed securities and related structured products suffered severe losses during the U.S. housing and credit crisis. The controversy focused on model assumptions, rating processes, issuer-paid incentives and the agencies' role in the expansion of structured finance.

  Source

• 2001

  Enron-related scrutiny

  Moody's, along with other rating agencies, attracted criticism and scrutiny concerning the timing and effectiveness of credit assessments surrounding Enron's collapse.

  Source

• 1995

  Jefferson County unsolicited-rating lawsuit

  Jefferson County, Colorado sued over an unsolicited negative outlook assigned to a bond issue, arguing that the rating increased borrowing costs. Moody's successfully argued that its assessment was a protected opinion, and the judgment was upheld on appeal.

  Source

Read more

• Issuer and investor education seminars

  Global

  Moody's has organized public seminars and made analysts available to explain its rating methodology and the information considered when assessing debt securities, particularly for new or less experienced issuers.

  Outcome. Ongoing educational and market-outreach activity.

  Source

• 2024

  Ratings-business rebrandStrategy

  Background

  Moody's Corporation was presenting a broader brand architecture spanning ratings, research, data and risk services.

  Action taken

  Moody's Investors Service was renamed Moody's Ratings on March 6, 2024.

  Aftermath

  The credit-rating division continued operating under the Moody's brand as an active global ratings provider.

  Source

• 2019

  Climate-risk data expansionM&A

  Background

  Investors and issuers were placing greater emphasis on physical climate exposure and transition risk.

  Action taken

  Moody's acquired a controlling share in Four Twenty Seven.

  Aftermath

  The transaction expanded Moody's access to climate-risk data and analysis alongside traditional credit research.

  Source

• 2000

  Spin-off from Dun & BradstreetM&A

  Background

  Institutional investors and the parent company viewed the ratings business as sufficiently distinct to operate as a standalone public company.

  Action taken

  Dun & Bradstreet separated Moody's Investors Service through Moody's Corporation.

  Aftermath

  The ratings business gained an independent corporate identity and became a major publicly traded financial-information company.

  Source

• 1970

  Adoption of issuer-paid ratingsStrategy

  Background

  The growth of photocopying and the free redistribution of ratings weakened the sustainability of a model funded only by investor subscriptions.

  Action taken

  Moody's began charging issuers for ratings, alongside its investor-facing research and information activities.

  Aftermath

  The issuer-paid model became the dominant economic model for major credit-rating agencies, while also generating continuing debate about conflicts of interest.

  Source

• Integrate ratings with broader credit data and analyticsStrategy

  Background

  Capital-market users increasingly require ratings, research, financial data, and risk analysis in connected workflows rather than as isolated publications.

  Action taken

  Moody's presents Moody's CreditView as a combined solution incorporating Moody's Investors Service ratings and research with Moody's Analytics data and content.

  Aftermath

  The approach positions the ratings business within a wider information and risk-management ecosystem while preserving the distinct identity of the ratings function.

  Source

• 2024

  Moody's Investors Service renamed Moody's Ratings[1]Moody's Ratingsen.wikipedia.org

  Leadership change · Other

  Moody's Corporation renamed its credit-rating business Moody's Ratings on March 6, 2024.

• 2019

  Moody's acquires controlling interest in Four Twenty Seven[1]Moody's Ratingsen.wikipedia.org

  M&A

  Moody's acquired a controlling share of Four Twenty Seven, a provider of climate-risk data and analysis.

• 2007

  Moody's downgrades hundreds of subprime mortgage securities[1]Moody's Ratingsen.wikipedia.org

  Product generation · Other

  The agency downgraded 399 subprime mortgage-backed securities in July and a further 2,506 tranches several months later, during the developing U.S. credit crisis.

• 2000

  Moody's becomes a separate publicly traded company[1]Moody's Ratingsen.wikipedia.org

  M&A

  The Moody's Investors Service business was separated from Dun & Bradstreet through the establishment of Moody's Corporation as a standalone public company.

1. 1Moody's Ratingsen.wikipedia.org
2. 2Moody's official credit ratings, research, and data websitemoodys.com
3. 3SEC administrative order concerning Moody's Investors Servicesec.gov
4. 4Moody's Investors Service company profilecrunchbase.com
5. 5Moody's Investors Service company directory profilednb.com
6. 6Moody's ESG Solutions Group: Moody's Retires Green Bond Assessment Product in Light of Market-Leading Second-Party Opinion Service Available from its Affiliate Vigeo Eirisfinanznachrichten.de