FITCH Full Form

What is the full form of FITCH?

Fitch Ratings is a globally leading company and provider of credit ratings, commentary, and research. Credit rating agencies analyse the ability of the company to pay its financial debt given its business and financial track. Other leading credit rating agencies are S&P Global Ratings, Moody’s Group, and BRC Investor Services S.A.

This Story also Contains

1. What is the full form of FITCH?
2. A Brief History
3. Fitch Rating Process
4. Fitch Rating System
5. Credit Rating Agencies in india

A Brief History

American economist John Knowles Fitch was the founder of Fitch Ratings in 1914. He further introduced AAA through a D rating system. Now it is a globally accepted system in the industry. Fitch Ratings became the nationally recognised statistical rating organisation (NRSRO).

In 1997, Fitch Ratings began associating with IBCA Limited to increase its global presence and set its headquarters in London. Today, it employs over 2,000 individuals and manages over 38 global offices. It has become the largest credit rating agency in the world. In July 2020, the company also received the award for the most transparent agency in Environmental Finance’s Sustainable Investment Awards.

Fitch Rating Process

The agency follows an extensive process for providing the credit rating to a company at the request of an issuer. The agency collects the company’s publicly available information, followed by the pre-analysis and requests for confidential forms from the company if suitable.

The analyst and team then prepare a questionnaire for the company, and face-to-face meetings with the company’s management and stakeholders assist in the in-depth analysis of the company. For further analysis, sector-specific ratings and recommendations are also used. After several rounds of qualitative and quantitative research and rating, they prepare credit ratings.

Fitch Rating System

There are two common credit rating scales: (1) long-term and (2) short-term. For long-term credit rating scales, Fitch Ratings have two grades category - investment and non-investment grades, depicting reliable companies and risky investment potential, respectively.

AAA, AA, A, and BBB are investment grades with the following meanings:

• AAA: Highest Credit Quality

• AA: Very High Credit Quality

• A: High Credit Quality

• BBB: Good Credit Quality

And non-investing grades are BB, B, CCC, CC, C, RD, and D with the following meaning:

• BB: Speculative

• B: Highly Speculative

• CCC: Substantial Credit Risk

• CC: Very High Levels of Credit Risk

• C: Near Default

• RD: Restricted Default

• D: Default

For the short-term credit rating scales, F1: Highest Credit Quality, F2: Good Credit Quality, F3: Fair Credit Quality, B: Speculative Credit Quality, C: High Default Risk, RD: Restricted Default, and D: Default are rating scales.

Credit Rating Agencies in india

Several such credit rating agencies check the creditworthiness of companies across India. These companies are regulated by the Securities and Exchange Board of India Act (SEBI) Regulations, established in 1999.

India Rating and Research Private Limited, ICRA Limited, Credit Rating Information Services of India Limited (CRISIL), Credit Analysis and Research Limited (CARE), etc. are some leading credit rating agencies in India. They ensure the creditworthiness of a company.