Fitch Ratings

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Definition of 'Fitch Ratings'

Fitch Ratings is a global credit rating agency that provides credit ratings, research, and analysis on a wide range of debt instruments and issuers. The company was founded in 1914 by John Knowles Fitch and is headquartered in New York City. Fitch Ratings is a subsidiary of Fitch Group, which is owned by Hearst Communications.

Fitch Ratings is one of the Big Three credit rating agencies, along with Moody's Investors Service and Standard & Poor's. The company's ratings are used by investors, lenders, and other market participants to assess the creditworthiness of issuers and their debt obligations. Fitch Ratings' ratings are also used by regulators to set capital requirements for banks and other financial institutions.

Fitch Ratings' ratings are based on a number of factors, including the issuer's financial strength, business risk, and economic conditions. The company assigns ratings on a scale from AAA to D, with AAA being the highest rating and D being the lowest. Fitch Ratings also assigns ratings to structured finance products, such as collateralized debt obligations (CDOs) and mortgage-backed securities (MBS).

Fitch Ratings' ratings are important because they can have a significant impact on the cost of borrowing for issuers. A higher rating will typically result in a lower interest rate, while a lower rating will result in a higher interest rate. Fitch Ratings' ratings can also affect the liquidity of an issuer's debt, as investors are more likely to buy debt from issuers with higher ratings.

Fitch Ratings is a controversial company because its ratings have been accused of being influenced by conflicts of interest. In particular, critics have alleged that Fitch Ratings has been too lenient in its ratings of structured finance products, which led to the financial crisis of 2008. Fitch Ratings has denied these allegations and maintains that its ratings are based on sound analysis.

Despite the controversy, Fitch Ratings remains one of the most important credit rating agencies in the world. Its ratings are used by investors, lenders, and regulators around the globe to make informed decisions about credit risk.

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