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Big Three (credit rating agencies)

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The Big Three credit rating agencies are S&P Global Ratings (S&P), Moody's, and Fitch Group. S&P and Moody's are based in the US, while Fitch is dual-headquartered in New York City and London, and is controlled by Hearst. As of 2013 they hold a collective global market share of "roughly 95 percent"[1] with Moody's and Standard & Poor's having approximately 40% each, and Fitch around 15%.[2]

According to an analysis by Deutsche Welle, "their special status has been cemented by law — at first only in the United States, but then in Europe as well."[1][3] From the mid-1990s until early 2003, the Big Three were the only "Nationally Recognized Statistical Rating Organizations (NRSROs)" in the United States — a designation meaning they were used by the US government in several regulatory areas. (Four other NRSROs merged with Fitch in the 1990s.)[4] The European Union has considered setting up a state-supported EU-based agency.[5]

The Asian credit rating market is relatively diverse. Due to the regulation by the Chinese central government, the Big Three penetration into the domestic market especially in China is considered less competitive than the local well-recognized agencies, namely China Chengxin International (CCXI), China Lianhe Credit Rating (Lianhe Ratings), Dagong Global Credit Rating, and Pengyuan Credit Rating.


2007–2010 financial crisis[edit]

The Big Three have been "under intense scrutiny" since the 2007–2008 global financial crisis following their favorable pre-crisis ratings of insolvent financial institutions like Lehman Brothers, and risky mortgage-related securities that contributed to the collapse of the U.S. housing market.

In the wake of the financial crisis, the Financial Crisis Inquiry Report[6] called out the "failures" of the Big Three rating agencies as "essential cogs in the wheel of financial destruction".

According to the Financial Crisis Inquiry Commission,[7]

The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies.

In their book on the crisis, journalists Bethany McLean and Joe Nocera criticized rating agencies for continuing "to slap their triple-A [ratings]s on subprime securities even as the underwriting deteriorated – and as the housing boom turned into an outright bubble" in 2005, 2006, and 2007. McLean and Nocera blamed the practice on "an erosion of standards, a willful suspension of skepticism, a hunger for big fees and market share, and an inability to stand up to" investment banks issuing the securities.[8] The February 5, 2013 issue of The Economist stated "it is beyond argument that ratings agencies did a horrendous job evaluating mortgage-tied securities before the financial crisis hit."[9]

Recent downgrades[edit]

In August 2011, S&P downgraded the long-held triple-A rating of US securities.[1] On August 1st, 2023, Fitch downgraded its credit-rating of United States Treasuries from AAA to AA+, as S&P had twelve years earlier, leaving only Moody's to still assign its highest rating to the country's debt (https://budget.house.gov/resources/staff-working-papers/us-debt-credit-rating-downgraded-only-second-time-in-nations-history).

Since the spring of 2010, one or more of the Big Three relegated Greece, Portugal and Ireland to "junk" status – a move that many EU officials mentioned has accelerated a burgeoning European sovereign-debt crisis. In January 2012, amid continued eurozone instability, S&P downgraded nine eurozone countries, stripping France and Austria off their triple-A ratings.[1]

Overreliance on the Big Three[edit]

A common criticism of the Big Three, and one that was highly linked to bank failure in the 2008 recession, is the dominance the agencies had on the market. As the three agencies held 95% of the market share, there was very little room for competition. Many feel this was a crucial contributor to the toxic debt-instrument environment that led to the financial downturn. In a preliminary exchange of views in the European Parliament Committee on Economic and Monetary Affairs, held in late 2011, it was advocated that more competition should exist amongst rating agencies. The belief was that this would diminish conflicts of interest and create more transparent criteria for rating sovereign debt.

There are over 100 national and regional rating agencies which could issue ratings if they can build up their credibility by meeting the conditions for being registered by European Securities and Markets Authority (ESMA). They could also use data from the European Central Bank and the International Monetary Fund to help with their analyses. Reliance on the "Big Three" could also be reduced by big companies assessing themselves, MEPs added.[10]

In November 2013, credit ratings organizations from five countries (CPR of Portugal, CARE Rating of India, GCR of South Africa, MARC of Malaysia, and SR Rating of Brazil) joint ventured to launch ARC Ratings, a new global agency touted as an alternative to the "Big Three".[11]

With the strategy of business internationalization as instructed by the Chinese central government, the Chinese rating agencies began establishing international branches in Hong Kong since 2012. As of 2020, the major Chinese international credit rating agencies are Lianhe Rating Global, China Chengxin (Asia Pacific) and Pengyuan International. They are regarded as domestic rivals against the Big Three.[12]

In 2023, the Indian government's Chief Economic Advisor, V Anantha Nageswaran questioned India's sovereign credit rating of BBB- by S&P and Baaa3 by Moodys and called for a review of the big three's rating methods.[13] In January 2024, CareEdge Ratings issued its Sovereign Ratings Framework for public consultation.[14]

In issuing the framework, CareEdge CEO, Mehul Pandya said, "This is an important step in our journey towards evolving into a global knowledge-based organisation. The ratings assigned using our methodology, in the future, will aid the investors and enhance the diversity of opinions in the market. The understanding of global markets so gained will enable CareEdge Ratings in incorporating such trends in our domestic ratings as well.”


  1. ^ a b c d Alessi, Christopher. "The Credit Rating Controversy. Campaign 2012". Council on Foreign Relations. Archived from the original on 27 July 2013. Retrieved 29 May 2013.
  2. ^ Hill, Claire A. (2002), "Rating Agencies Behaving Badly: The Case of Enron", Conn. L. Rev. 35, 1145
  3. ^ "S&P warning puts damper on Eurogroup plans". 05.07.2011. Deutsche Welle.
  4. ^ "U.S. SEC Report on the Role and Function of Credit Rating Agencies in the Operation of the Securities Markets" (PDF). January 2003. Retrieved 5 April 2012.
  5. ^ The Times, 3 June 2010, Europe launches credit ratings offensive
  6. ^ the ten-member commission appointed by the United States government with the goal of investigating the causes of the financial crisis of 2007–2010
  8. ^ McLean, Bethany and Joe Nocera. All the Devils Are Here: The Hidden History of the Financial Crisis, Portfolio, Penguin, 2010 (p.111)
  9. ^ TE (5 February 2013). "Free speech or knowing misrepresentation?". The Economist.
  10. ^ "Credit rating agencies: MEPs want less reliance on "big three"". The European Parliament. December 2011. Retrieved 19 January 2012.
  11. ^ Reuters, 12 November 2013, " (Reuters) – Credit ratings organisations from five countries are launching a new global agency, touting it as an alternative to the Big Three agencies which they say no longer meet the needs of the new globalised world. In a statement on Tuesday, ARC Ratings said the agency would launch in London as a joint venture between CPR of Portugal, CARE Rating of India, GCR of South Africa, MARC of Malaysia, and Brazil's SR Rating."
  12. ^ people.cn, 2 November 2012, " (people.cn) – 中国评级机构挑战美国统治“三巨头”"
  13. ^ "India's economic adviser calls for review of sovereign ratings methods". Reuters. Reuters. 22 December 2023. Retrieved 29 February 2024.
  14. ^ "CareEdge Ratings unveils its Sovereign Rating Methodology for Public Consultation" (PDF). Care Edge Ratings. 30 January 2024. Retrieved 29 February 2024.