What is Fitch?
Fitch Ratings is a global credit rating agency that provides opinions on the creditworthiness of companies and governments. It assigns letter grades to indicate the issuer’s ability to meet its financial obligations.
History of Fitch
Fitch Ratings was founded in 1913 by John Knowles Fitch. It has since grown to become one of the ‘Big Three’ credit rating agencies, alongside Moody’s and Standard & Poor’s.
How does Fitch work?
Fitch analyzes financial data, market trends, and economic conditions to assess the risk of default. Its ratings range from ‘AAA’ (highest credit quality) to ‘D’ (default).
Importance of Fitch Ratings
Fitch’s ratings are used by investors to make informed decisions about where to allocate their funds. A higher rating indicates lower risk, while a lower rating signifies higher risk.
Examples of Fitch Ratings
- Apple Inc. – Fitch Rating: AA+
- United States Government – Fitch Rating: AAA
- Greece – Fitch Rating: BB- (junk status)
Case Studies
During the 2008 financial crisis, Fitch downgraded the credit ratings of many mortgage-backed securities, leading to widespread panic in the financial markets.
Statistics
According to Fitch Ratings, global corporate defaults hit a record high in 2020 due to the COVID-19 pandemic, with the majority of defaults occurring in the energy and retail sectors.
