Reviewed by Oct 05, 2020| Updated on
Fitch Ratings is a multinational credit rating agency with offices in New York and London. Investors use the ratings of this company to refer to investments that are not going default and yield a good return.
Fitch, along with Moody's and Standard & Poor's (S&P's), is one of the world's top three credit rating agencies. The Fitch rating system is somewhat similar to S&P's since they both use a letter scheme. For instance, a company which is rated AAA is of the highest quality and has reliable cash flows. Whereas, a company that has been rated, D, has defaulted.
The steps taken by Fitch for credit rating is as follows:
Step 1: Rating process initiates when an issuer/underwriter approaches the rating agency. A primary and back-up analyst is then assigned.
*Step 2: *Agency collects the publicly available information, such as financials and data reports.
*Step 3: *Analyst performs a pre-analysis and requests non-public information if suitable.
*Step 4: *The analytical team prepares a detailed questionnaire.
*Step 5: *Face-to-face meetings or site visits are conducted with the management and stakeholders of the entity being rated.
*Step 6: *In-depth analysis is performed, involving an application of sector-specific rating criteria and methodologies.
*Step 7: *The primary and secondary analysts draft a report of rating recommendation and rationale in a committee package.
*Step 8: *The rating committee reviews the rating information after considering several qualitative and quantitative factors, keeping in mind the current and prospective performance of the company.
*Step 9: *Assigning the ratings and publishing of commentary.
*Step 10: *Conducting ongoing surveillance.
Fitch's rating system can be classified as follows: