User:Mysidae/The Big Three

The Big Three
The three largest credit rating agencies—Standard & Poor's, Moody's Investor Service, and Fitch Ratings—are collectively referred to as the "Big Three" due to their substantial market share. According to the most recent U.S. Securities and Exchange Commission (SEC) report, the agencies together account for approximately 96% of all credit ratings. As of December 2012, S&P is the largest of the three, with 1.2 million outstanding ratings and 1,416 analysts and supervisors. The agency's ratings focus narrowly on the probability that a security will default, and do not reflect recovery value or the predicted length of default. Moody's is the second largest agency, with 1 million outstanding ratings and 1,252 analysts and supervisors. Unlike S&P, Moody's ratings reflect expected investor losses in the case of default, not strictly default probability. Fitch is the smallest of the Big Three, with approximately 350,000 outstanding ratings, and is sometimes used as an alternative to S&P and Moody’s. Fitch's ratings on corporate obligations incorporate a measure of investor loss in the event of default, but its ratings on structured, project, and public finance obligations narrowly measure default risk.

The credit rating industry has always been characterized by industry concentration. Since the establishment of the first agency in 1909, there have never been more than four credit rating agencies with significant market share. The situation for international financial markets is similar, as the same three rating agencies have significant share in that market as well. Why this concentrated market structure has developed is a matter of theoretical dispute. One widely-cited opinion is that the Big Three's historical reputation within the financial industry creates a high barrier of entry for new entrants. Following the enactment of the Credit Rating Agency Reform Act of 2006, seven additional rating agencies have attained recognition from the SEC as Nationally Recognized Statistical Rating Organizations (NRSROs). While these other agencies remain niche players, some have gained market share following the 2008 financial crisis, and in October 2012 several announced plans to join together and create a new organization called the Universal Credit Rating Group.