Credit ratings are considered one of many indicators of the financial strength of an institution, by indicating the probability of the counterparty being able to honour their obligations.
They are assigned by independent organisations known as credit rating agencies, such as Standard and Poor’s, Moody’s and Fitch.
Credit ratings are merely opinions of an institution’s overall financial capacity to meet its financial commitments – they do not apply to any specific financial obligation – and they are not a guarantee of financial strength, or a recommendation to purchase, sell, or hold a financial obligation.
Credit rating agencies assign credit ratings based on their views of the ‘worst possibilities’ in the ‘visible future’ for the institution. They do not base their opinion on the past record or present status of the institution.
Ratings are normally in the form of letter designations. For further information on the definitions of the ratings assigned by each agency please refer to their websites below: