2020 Annual Report On Nrsros

A N N U A L  R E P O R T  |   i   

 
  
  

 

O F F I C E  O F  C R E D I T  R A T I N G S  

Annual 
Report 

ON 

NATIONALLY 
RECOGNIZED 

STATISTICAL RATING 
ORGANIZATIONS 

As Required by Section 6 of the Credit 
Rating Agency Reform Act of 2006 

December 2020 

U  . S .  S E C U R I T I E S  A N D  E X  C H A N G E  C  O M M I S  S I O N  



|   O F F I C E  O F  C R E D I T  R A T I N G S    

THIS IS A REPORT OF THE STAFF OF THE U.S. SECURITIES AND EXCHANGE COMMISSION. 
THE COMMISSION HAS EXPRESSED NO VIEW REGARDING THE ANALYSIS, FINDINGS, OR CONCLUSIONS CONTAINED HEREIN. ii 



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Table of Contents

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. STATUS OF REGISTRANTS AND APPLICANTS . . . . . . . . . . . . . . . . . . . . . . . . . 2

III. ACTIVITIES RELATING TO NRSROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

B. Commission Orders and Releases and Staff Publications . . . . . . . . . . . . . . . . . 6

IV. COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. Select NRSRO Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 

1. NRSRO Credit Ratings Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. NRSRO Analytical Staffng Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

3. NRSRO Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

B. Recent Developments in the State of Competition Among NRSROs . . . . . . . . . .16

1. Market Share Observations in the Asset-Backed Securities Rating Category . . . .16

(a) CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

(b) ABS/MBS/CLO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2. Other Asset-Backed Securities Market Share Observations . . . . . . . . . . . . . 22

C. Barriers to Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

V. TRANSPARENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

VI. CONFLICTS OF INTEREST.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  27

VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28



  

   

    

                                       

     

  

                                      

         

     

 

  

     

 

     

                         

     

                         

     

                         

     

                         

     

  

     

                         

     

 

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Table of Charts

Chart 1. List of NRSROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Chart 2. Number of Outstanding Credit Ratings as of December 31, 2019

by Rating Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chart 3. Percentage by Rating Category of Each NRSRO’s Outstanding

Credit Ratings of the Total Outstanding Credit Ratings of all NRSROs as

of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chart 4. Breakdown of Ratings Reported Outstanding as of December 31, 2019 . . . . . . .12

Chart 5. Breakdown of Non-Government Securities Ratings Reported

Outstanding as of December 31, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Chart 6. NRSRO Credit Analysts and Credit Analyst Supervisors. . . . . . . . . . . . . . . . .13

Chart 7. NRSRO Revenue Information: Fiscal Year Percentage of Total

Reported NRSRO Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Chart 8. Rating Agency Market Share for Total Non-Agency U.S. CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .18

Chart 9. Rating Agency Market Share for U.S. Conduit CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .18

Chart 10. Rating Agency Market Share for U.S. Single-Borrower CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .19

Chart 11. Rating Agency Market Share for Agency CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .19

Chart 12. Rating Agency Market Shares for U.S. ABS Issued in

2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chart 13. Rating Agency Market Shares for U.S. MBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .21

Chart 14. Rating Agency Market Shares for U.S. CLO

Issued in First Half of 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . .21



  

I. Introduction 

T
he staff (the “Staff”) of the U.S. Securities 
and Exchange Commission (the 
“Commission” or “SEC”) is providing 
this report (“Report”) regarding nationally 

recognized statistical rating organizations 
(“NRSROs”) pursuant to Section 6 of the Credit 
Rating Agency Reform Act of 2006 (“Rating Agency 
Act”).1 This Report reflects solely the Staff’s views. 
Section 6 of the Rating Agency Act requires the 
Commission to submit an annual report (“Annual 
Report”) to the Committee on Banking, Housing, 
and Urban Affairs of the U.S. Senate and the 
Committee on Financial Services of the U.S. House 
of Representatives (“Congressional Committees”) 
that, with respect to the year to which the Annual 
Report relates:

§	identifies applicants for registration as NRSROs 
under Section 15E of the Securities Exchange Act 
of 1934, as amended (the “Exchange Act”);2

§	specifies the number of, and actions taken on, 
such applications; and

§	specifies the views of the Commission on the state 
of competition, transparency, and conflicts of 
interest among NRSROs.

1	 Pub. L. No. 109-291, 120 Stat. 1327 (Sept. 29, 2006). The Rating Agency Act, among other things, added Section 15E 
to the Securities Exchange Act of 1934 to establish self-executing requirements on NRSROs and provide the Commission 
with the authority to implement a registration and oversight program for NRSROs. In June 2007, the Commission 
approved rules implementing such a program. See Oversight of Credit Rating Agencies Registered as Nationally 
Recognized Statistical Rating Organizations, Release No. 34-55857 (June 5, 2007), 72 FR 33564 (June 18, 2007), 
available at https://www.sec.gov/rules/final/2007/34-55857fr.pdf.

2	 Unless otherwise noted, all references to specific statutory sections and rules in this Report are to sections in the Exchange 
Act and related rules.

3	 Note, however, that Section III.B of this Report includes information regarding Commission Orders and Releases and Staff 
Publications from June 26, 2019 through November 30, 2020.

4	 Prior Annual Reports can be found under “Annual Reports to Congress” in the “Reports and Studies” section of the OCR 
webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html.

This Report generally focuses on the period from 
June 26, 2019 to June 25, 2020 (the “Report 
Period”).3 In addition to addressing the items 
specified in Section 6 of the Rating Agency Act, this 
Report provides an overview of certain Commission 
and Staff activities relating to NRSROs. 

Information regarding the topics covered in this 
Report with respect to prior periods can be found 
on the Office of Credit Ratings (“OCR”) page of the 
Commission’s website.4

A N N U A L  R E P O R T  |  1 

https://www.sec.gov/rules/final/2007/34-55857fr.pdf
https://www.sec.gov/ocr/ocr-reports-and-studies.html


  

 
 

 
 

 

  
  
  
   

  
 
 

  
 

  
 
 
 

 

   
 

 
   

 

 
  

 
 

 
 

  
 

  

 

 

 

II. Status of Registrants 
and Applicants 

S
ection 3(a)(62) defines a “nationally recog-
nized statistical rating organization” as a 
credit rating agency that is registered under 
Section 15E and issues credit ratings certified 

by qualified institutional buyers, in accordance with 
Section 15E(a)(1)(B)(ix), with respect to: 

i. financial institutions, brokers, or dealers; 
ii. insurance companies; 
iii. corporate issuers; 
iv. issuers of asset-backed securities (as that term 

is defined in 17 CFR 229.1101(c)); 

v. issuers of government securities, municipal 
securities, or securities issued by a foreign 
government; or 

vi. a combination of one or more categories of 
obligors described in any of clauses (i) through 
(v) above. 

As of November 30, 2020, there are nine credit 
rating agencies registered as NRSROs.5 Chart 1 
below lists each NRSRO registered with the 
Commission, categories of credit ratings described 
in clauses (i) through (v) of Section 3(a)(62)(A) in 
which each NRSRO is registered, and location of 
each NRSRO’s principal office.6 

Chart 1: List of NRSROs 

NRSRO Categories of Credit Ratings Principal Offce 

A.M. Best Rating Services, Inc. (“AMB”) (ii), (iii), and (iv) U.S. 

DBRS, Inc. (“DBRS”) (i) through (v) U.S. 

Egan-Jones Ratings Company (“EJR”) (i) through (iii) U.S. 

Fitch Ratings, Inc. (“Fitch”) (i) through (v) U.S. 

HR Ratings de México, S.A. de C.V. (“HR”) (i), (iii), and (v) Mexico 

Japan Credit Rating Agency, Ltd. (“JCR”) (i), (ii), (iii), and (v) Japan 

Kroll Bond Rating Agency, Inc. (“KBRA”) (i) through (v) U.S. 

Moody’s Investors Service, Inc. (“MIS”) (i) through (v) U.S. 

S&P Global Ratings (“S&P”) (i) through (v) U.S. 

5 Section 15E(a) sets out registration procedures for a credit rating agency to voluntarily apply to be registered with the 
Commission as an NRSRO. 

6 See the current Form NRSRO on each NRSRO’s website for any updates to this information. Each NRSRO must file with 
the Commission on EDGAR a Form NRSRO for annual certification and registration updates pursuant to Rule 17g-1(e) 
and (1)(f), and each NRSRO must make its current Form NRSRO publicly and freely available on its website pursuant to 
Rule 17g-1(i). Links to each NRSRO’s website can be found under the “Current NRSROs” section of the OCR webpage, 
available at https://www.sec.gov/ocr/ocr-current-nrsros.html. 

2 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/ocr/ocr-current-nrsros.html


  

 
 
 
 
 
 
 

 
 

 
 
 

 
 

 
 

 

 
 

 

 

 
 

 
 

 
 
 

 
 

 
 

 
 

  

 
 

 

On July 2, 2019, Morningstar, Inc., the parent 
of Morningstar Credit Ratings, LLC (“MCR”), 
completed an acquisition of DBRS and the two 
NRSROs began integrating their operations. On 
November 15, 2019, MCR furnished a notice of 
withdrawal from registration to the Commission 
(which became effective on December 30, 2019), 
and DBRS filed an update to Form NRSRO to add 
MCR as a credit rating affiliate. On November 
23, 2020, DBRS filed an update to Form NRSRO 
to remove MCR as a credit rating affiliate. For 
purposes of this Report: (1) activities of DBRS, 
Inc. prior to July 2, 2019 are attributed to 
“pre-integration DBRS;” (2) activities of MCR prior 
to July 2, 2019 are attributed to “MCR;” and (3) 
activities of the two NRSROs from July 2, 2019 
onward are attributed to “DBRS.” 

For purposes of this Report only, we refer to Fitch, 
MIS, and S&P as “larger NRSROs” and the other 
NRSROs (AMB, DBRS, EJR, HR, JCR, and KBRA) 
as “smaller NRSROs.” 

Applications for initial registration and for regis-
tration by current NRSROs in additional rating 
categories are filed on Form NRSRO.7 In addition, 
Section 15E(b) requires NRSROs to promptly 
amend Form NRSRO if any information or 
document provided therein becomes materially 
inaccurate. This section also requires NRSROs to 
annually amend Form NRSRO to update ratings 
count and performance information, certify the 
continuing accuracy of the information and 
documents provided therein, and list any material 
change thereto during the previous calendar year. 
OCR Staff review such amendments to Forms 
NRSRO in light of the requirements of Section 
15E(b), Rule 17g-1, and the Instructions to 
Form NRSRO. 

No applications for initial registration as an NRSRO 
or for registration by a current NRSRO in additional 
rating categories were filed with the Commission 
during the Report Period. 

7 See Section 15E(a) and Rule 17g-1; see also Form NRSRO, available at https://www.sec.gov/about/forms/formnrsro.pdf. 

A N N U A L  R E P O R T  |  3 

https://www.sec.gov/about/forms/formnrsro.pdf


  

 
 

 
 
 
 

 
 

 
 
 

 

 
 

 
 

 
 

 

 
 
 
  

 
 

  
 

 
 

 
 

 
 

 
 

 
 

 
 
 

 
 

 
  

 

  
 

III. Activities Relating 
to NRSROs 

A. ACTIVITIES 

T
he Dodd-Frank Wall Street Reform and 
Consumer Protection Act (“Dodd-Frank 
Act”)8 mandated the creation of OCR. OCR 
is responsible for the oversight of credit 

rating agencies registered with the Commission 
as NRSROs. OCR’s Staff includes professionals 
with expertise in a variety of areas that relate to its 
regulatory mission, such as corporate, municipal, 
and structured debt finance.9 

OCR’s responsibilities—as mandated by the Dodd-
Frank Act—include, among other things, conducting 
an examination of each NRSRO at least annually in 
eight specified review areas.10 Information regarding 
the examinations is included in OCR’s annual 
examination reports.11 

OCR also monitors trends and developments 
affecting the credit rating industry. For example, 
OCR Staff may meet with NRSROs to discuss rating 
and industry developments and with the boards of 
directors of NRSROs to discuss, among other things, 
compliance and oversight matters. OCR Staff also 

may meet with a variety of other market partici-
pants, including investors, issuers, regulators, and 
industry organizations, to discuss matters relevant to 
the credit rating industry. 

During the Report Period, OCR Staff continued 
to participate in meetings that involved rating 
agency regulators globally, including those of the 
supervisory colleges that were formed for the 
largest internationally active credit rating agencies. 
The supervisory colleges were formed to enhance 
communication among credit rating agency 
regulators globally with respect to examinations 
of the relevant credit rating agencies.12 During 
the Report Period, each college held an in-person 
meeting and conducted quarterly calls. OCR Staff 
also conducted additional discussions with interna-
tional regulators, as appropriate. 

In 2019, the Fixed Income Market Structure 
Advisory Committee (“FIMSAC”)13 established a 
Credit Ratings Subcommittee to consider the role of 
credit ratings issued by NRSROs in the corporate 

8 See Pub. L. No. 111-203, 124 Stat. 1376 (2010). 
9 See Section 15E(p)(2) for a description of OCR staffing requirements. 
10 See Section 15E(p)(3). 
11 The examination reports can be found under “Summary Examination Reports” in the “Reports and Studies” section of the 

OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html. 
12 See IOSCO, Supervisory Colleges for Credit Rating Agencies, Final Report (July 2013), available at https://www.iosco. 

org/library/pubdocs/pdf/IOSCOPD416.pdf. The SEC serves as chair of the colleges for S&P and MIS, and OCR Staff 
represents the SEC in this regard. The European Securities and Markets Authority serves as chair of the college for Fitch. 

13 FIMSAC was formed in November 2017 to provide the Commission with diverse perspectives on the structure and 
operations of the U.S. fixed income markets, as well as advice and recommendations on matters related to fixed income 
market structure. The FIMSAC’s current charter is available at https://www.sec.gov/spotlight/fixed-income-advisory-
committee/fimsac-charter-nov-2019.pdf. 

4 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/ocr/ocr-reports-and-studies.html
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD416.pdf.
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD416.pdf.
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-charter-nov-2019.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-charter-nov-2019.pdf
https://agencies.12
https://reports.11
https://areas.10


  

 

 
 

 
 
 

 
 

 

 
 

  
 

 

 

 
 

 

 
 

 
  

  
 

 

 
 

 

 

 
 

 
 

 

 
 

 
 

  
 
 

 
 

 
 
 

 
 

 
 

bond and municipal securities markets.14 During 
the Report Period, the Credit Ratings Subcom-
mittee made several presentations regarding 
NRSRO competition and compensation models 
at the FIMSAC’s quarterly meetings.15 At the 
FIMSAC meeting on June 1, 2020,16 the FIMSAC 
approved, for the Commission’s consideration, the 
Credit Ratings Subcommittee’s recommendation 
for mitigating potential conflicts of interest in 
credit ratings.17 

In addition, the SEC’s Investor Advisory Committee 
(“IAC”)18 met on July 25, 2019 to discuss the SEC’s 

approach to regulation in areas with limited 
competition, including the credit rating agency 
industry.19 The IAC met on September 19, 2019 
to discuss increased leverage and related SEC 
regulatory implications, including the role of 
NRSROs in the leveraged loan and CLO markets.20 

At the IAC meeting on November 7, 2019,21 SEC 
Chairman Jay Clayton suggested future topics of 
focus for the committee, including questions related 
to credit rating agencies.22 At the IAC meeting on 
May 21, 2020,23 Chairman Clayton suggested 
additional topics of focus for the committee related 
to credit rating agencies.24 

14 Topics that may be considered by the Credit Ratings Subcommittee include, but are not limited to, (1) the use of credit 
ratings by various market participants and the implications of ratings changes for these market participants, (2) the costs 
and benefits of the current model for credit rating issuance, (3) the U.S. regulatory regime for credit rating agencies registered 
as NRSROs, and (4) issuances of unsolicited credit ratings and the publication of commentaries. See https://www.sec.gov/ 
spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm. 

15 See Transcript of FIMSAC Meeting, SEC (July 29, 2019), available at https://www.sec.gov/spotlight/fixed-income-advisory-
committee/fimsac-072919transcript.txt; Transcript of FIMSAC Meeting, SEC (Nov. 4, 2019), available at https://www.sec. 
gov/spotlight/fixed-income-advisory-committee/fimsac-110419transcript.txt; Transcript of FIMSAC Meeting, SEC (Feb. 
10, 2020), available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-transcript.pdf. The 
Credit Ratings Subcommittee circulated a discussion document ahead of the February 10, 2020 FIMSAC meeting, which 
is available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-document-
alternate-model-and-potential-initiatives.pdf. 

16 See Transcript of FIMSAC Meeting, SEC (June 1, 2020), available at https://www.sec.gov/spotlight/fixed-income-advisory-
committee/fimsac-060120-transcript.pdf. The Credit Ratings Subcommittee circulated its preliminary recommendation 
ahead of this FIMSAC meeting. See https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminary-
recommendations-credit-ratings-subcommittee.pdf. 

17 See FIMSAC Recommendation Regarding Ways to Mitigate Conflicts of Interest in Credit Ratings (June 1, 2020), available at 
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-recommendations-credit-ratings-subcommittee.pdf. 

18 Section 911 of the Dodd-Frank Act established the IAC to advise the Commission on regulatory priorities, the regulation 
of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor 
interests and to promote investor confidence and the integrity of the securities marketplace. The Dodd-Frank Act authorizes 
the IAC to submit findings and recommendations for review and consideration by the Commission. See https://www.sec.gov/ 
spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf. 

19 See Webcast of IAC Meeting, SEC (July 25, 2019), available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac072519. 

20 See Webcast of IAC Meeting, SEC (Sept. 19, 2019), available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac091919. 

21 See Webcast of IAC Meeting, SEC (Nov. 7, 2019) available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac110719. 

22 See Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (Nov. 7, 2019), available at https://www.sec. 
gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719 (noting interest in issues such as reliance 
by retail investors on credit rating agencies, whether credit rating agencies are appropriately disclosing, monitoring and 
managing their conflicts, whether investors are harmed by compensation models of credit rating agencies, and whether 
there are alternative payment models that would better align the interests of rating agencies with those of investors). 

23 See Webcast of IAC Meeting, SEC (May 21, 2020), available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac052120. 

24 See Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (May 21, 2020), available at https://www.sec. 
gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120 (noting, in addition to reliance 
by retail investors on credit rating agencies, interest in issues such as how much ratings influence today’s marketplace, 
including the potential risks and downstream effects of investment strategies and mandates that reference ratings (and 
consequently take action based on downgrades)). 

A N N U A L  R E P O R T  |  5 

https://www.sec.gov/spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-072919transcript.txt
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-072919transcript.txt
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-transcript.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-document-alternate-model-and-potential-initiatives.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-document-alternate-model-and-potential-initiatives.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-060120-transcript.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-060120-transcript.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminary-recommendations-credit-ratings-subcommittee.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminary-recommendations-credit-ratings-subcommittee.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-recommendations-credit-ratings-subcommittee.pdf
https://www.sec.gov/spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf
https://www.sec.gov/spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac072519
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac072519
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac091919
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac091919
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac110719
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac110719
https://www.sec.gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719
https://www.sec.gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac052120
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac052120
https://www.sec.gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120
https://www.sec.gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120
https://www.sec
https://agencies.24
https://agencies.22
https://markets.20
https://industry.19
https://ratings.17
https://meetings.15
https://markets.14


  

 
 
 

 
 

 
 
 

 
 

 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

  
 

  

 

 

 
 

 

  
  

 
 

 
 

 
 

 
 
 

 
 

 
 

 

 
 

 
 

 
 
 
 

  
 
 
 

In January 2020, Chairman Clayton asked 
Commission Staff to monitor and, to the extent 
necessary or appropriate, provide guidance and 
other assistance to issuers and other market partici-
pants regarding disclosures related to the current 
and potential effects of COVID-19.25 Following the 
Chairman’s January 2020 statement, Commission 
Staff expanded the ongoing outreach efforts with 
credit rating agencies, which included periodically 
communicating with the NRSROs to keep abreast of 
how they are considering the impacts of COVID-19 
on their credit ratings and operations.26 

On April 24, 2020, the Commission announced the 
formation of an internal, interdisciplinary COVID-19 
Market Monitoring Group, the membership of 
which includes the Director of OCR.27 This group 
was formed to assist the Commission and its various 
divisions and offices in (1) developing Commission 
and Staff analyses and actions related to the effects of 
COVID-19 on markets, issuers, and investors, and 
(2) responding to requests for information, analyses, 
and assistance from fellow regulators and other 
public sector partners on market matters arising from 
the effects of COVID-19.28 In addition to OCR’s 
continued participation in the COVID-19 Market 
Monitoring Group, OCR Staff continues to monitor 
the impact of COVID-19 on market matters related 
to the activities of the NRSROs. 

B. COMMISSION ORDERS AND 
RELEASES AND STAFF PUBLICATIONS 
The Commission and the Staff, as applicable, 
issued the following orders, releases, and 
publications relating to NRSROs or credit ratings 
in general from the start of the Report Period to 
November 30, 2020: 

§	Order Instituting Administrative and Cease-
and-Desist Proceedings Pursuant to Sections 
15E(d) and 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing 
Remedial Sanctions and a Cease-and-Desist 
Order, Release No. 34-90037 (Sept. 29, 2020).29 

The Commission instituted settled administrative 
proceedings against KBRA concerning violations 
of Rule 17g-8(b)(1) in connection with rating 
CLO Combo Notes. The SEC’s order finds 
that KBRA’s policies and procedures were not 
reasonably designed to ensure that it rated CLO 
Combo Notes in accordance with the terms of 
those securities. 

§	Order Instituting Administrative and Cease-
and-Desist Proceedings Pursuant to Sections 
15E(d) and 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing 
Remedial Sanctions and a Cease-and-Desist 
Order, Release No. 34-90036 (Sept. 29, 2020).30 

The Commission instituted settled administrative 
proceedings against KBRA concerning violations 
of Section 15E(c)(3)(A) in connection with rating 
CMBS. The SEC’s order finds that KBRA’s 

25 See Chairman Jay Clayton, Statement on Proposed Amendments to Modernize and Enhance Financial Disclosures; Other 
Ongoing Disclosure Modernization Initiatives; Impact of the Coronavirus; Environmental and Climate-Related Disclosure 
(Jan. 30, 2020), available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. 

26 See SEC Coronavirus (COVID-19) Response: Market Monitoring and Engagement with Market Participants, available at 
https://www.sec.gov/sec-coronavirus-covid-19-response. 

27 See SEC Forms Cross-Divisional COVID-19 Market Monitoring Group (Apr. 24, 2020), available at https://www.sec.gov/ 
news/press-release/2020-95. 

28 See SEC COVID-19 Market Monitoring Group – Update and Current Efforts (May 13, 2020), available at https://www. 
sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13. 

29 Available at https://www.sec.gov/litigation/admin/2020/34-90037.pdf. 
30 Available at https://www.sec.gov/litigation/admin/2020/34-90036.pdf. 

6 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30
https://www.sec.gov/sec-coronavirus-covid-19-response
https://www.sec.gov/news/press-release/2020-95
https://www.sec.gov/news/press-release/2020-95
https://www.sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13
https://www.sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13
https://www.sec.gov/litigation/admin/2020/34-90037.pdf
https://www.sec.gov/litigation/admin/2020/34-90036.pdf
https://2020).30
https://2020).29
https://COVID-19.28
https://operations.26
https://COVID-19.25


  

 
 

 
 
 

 
 

 
 

 
 

 
 

  
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
 

 
 

 

 
 
 
 

  

   

 
 

 
 

 
 

 
 

 
 

  

 
 

 
 

 
 

 
 

 
 

 
 

  
 
 
 
 
 
 
 
 
 
 

internal control structure failed to prevent or 
detect the ambiguity in KBRA’s record of its 
methodology for determining the CMBS ratings, 
such as a comparison of the methodology to the 
analysis used for specific transactions. 

§	Credit Ratings, Procyclicality and Related 
Financial Stability Issues: Select Observations 
(July 15, 2020).31 The Commission’s COVID-19 
Market Monitoring Group, which is discussed 
in Section III.A above, issued this statement 
describing the Group’s exploration of whether 
credit assessments and credit rating agency 
downgrades—and market anticipation of, and 
responses to, those ratings actions—may 
(1) contribute to negative procyclicality in certain 
circumstances, and (2) have implications for 
financial stability. 

§	Order Instituting Administrative and Cease-
and-Desist Proceedings Pursuant to Sections 
15E(d) and 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing 
Remedial Sanctions and a Cease-and-Desist 
Order, Release No. 34-88880 (May 15, 2020).32 

The Commission instituted settled administrative 
proceedings against MCR concerning violations 
of Rule 17g-5(c)(8)(i), which prohibits a rating 
agency from issuing or maintaining a credit rating 
where an analyst who participates in determining 
or monitoring credit ratings also participates in 
sales and marketing activity, and Section 15E(h) 
(1), which requires credit rating agencies to 
establish, maintain, and enforce policies and 
procedures reasonably designed to address and 
manage conflicts of interest. 

§	Staff No-Action Letter (Mar. 30, 2020).33 Due 
to COVID-19, EJR submitted a letter to staff 
related to its delay in filing its audited financial 
statements required by Rule 17g-3(a)(1).34 The 
Staff issued a no-action letter to EJR informing it 
that the Staff would not recommend enforcement 
action to the Commission if EJR did not file its 
audited financial statements by March 30, 2020 
as required by Rule 17g-3(a)(1), subject to the 
condition that such financial statements would 
be filed with the Commission no later than 
April 20, 2020. 

§	The SEC’s Office of Credit Ratings and NRSRO 
Regulation: Past, Present, and Future (Feb. 
24, 2020).35 OCR then-Director Jessica Kane 
delivered a speech describing the NRSRO 
regulatory framework and certain regulatory 
requirements; OCR’s responsibility for 
administering this regulatory framework; and 
observed trends in NRSRO compliance. The 
speech referenced the Commission’s August 
2019 rule release36 (discussed in the final bullet 
point under this section of the Report) and 
invited interested parties to provide input on the 
effectiveness of Rule 17g-5(a)(3). 

31 Available at https://www.sec.gov/news/public-statement/covid-19-monitoring-group-2020-07-15. 
32 Available at https://www.sec.gov/litigation/admin/2020/34-88880.pdf. 
33 Available at https://www.sec.gov/ocr/EJRNoActionLetter/EJR_Letter_3-30-20_1.pdf. 
34 See Letter from EJR to OCR Staff (Mar. 30, 2020), available at https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20 

No-Action_%20Application_3-30-2020.pdf. 
35 OCR Former Director Jessica Kane, Speech, The SEC’s Office of Credit Ratings and NRSRO Regulation: Past, Present, 

and Future (Feb. 24, 2020), available at https://www.sec.gov/news/speech/speech-jessica-kane-2020-02-24. 
36 See Amendments to Rules for Nationally Recognized Statistical Rating Organizations, Release No. 34-86590 (Aug. 7, 

2019), 84 FR 40247, 40250 (Aug. 14, 2019) (“2019 Adopting Release”), available at https://www.govinfo.gov/content/ 
pkg/FR-2019-08-14/pdf/2019-17218.pdf. 

A N N U A L  R E P O R T  |  7 

https://www.sec.gov/news/public-statement/covid-19-monitoring-group-2020-07-15
https://www.sec.gov/litigation/admin/2020/34-88880.pdf
https://www.sec.gov/ocr/EJRNoActionLetter/EJR_Letter_3-30-20_1.pdf
https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20No-Action_%20Application_3-30-2020.pdf
https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20No-Action_%20Application_3-30-2020.pdf
https://www.sec.gov/news/speech/speech-jessica-kane-2020-02-24
https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://2020).35
https://17g-3(a)(1).34
https://2020).33
https://2020).32
https://2020).31


  

 
 
 
 
 
 

 
 

 
 
 

 
  

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
 

 
 

 
 

 
 

 
 
 

 
 

 
 

§	2019 Summary Report of Commission Staff’s 
Examinations of Each Nationally Recognized 
Statistical Rating Organization, dated January 
2020, as required under Section 15E(p)(3)(C).37 

The report summarizes essential findings of the 
examinations conducted by Staff under Section 
15E(p)(3)(C). 

§	Annual Report on Nationally Recognized 
Statistical Rating Organizations, dated January 
2020 (“January 2020 Annual Report”), as 
required by Section 6 of the Rating Agency 
Act.38 The Annual Report addresses the matters 
described in the first paragraph under Section I 
of this Report. 

§	2019 Adopting Release.39 The Commission 
adopted an amendment to Rule 17g-5(a)(3) that 
provides for an exemption from the rule with 
respect to credit ratings for certain structured 
finance products where the issuer is a non-U.S. 
person and the NRSRO has a reasonable basis to 
conclude that the structured finance product 
will be offered and sold exclusively outside the 
United States. In the 2019 Adopting Release, the 
Commission directed the Staff to further evaluate 
the effectiveness of Rule 17g-5(a)(3) with respect 
to ratings of structured finance products that 
are not eligible for relief under the exemption. 
The Commission also adopted conforming 
amendments to similar exemptions in Rule 
17g-7(a) and Rule 15Ga-2. 

37 Available at https://www.sec.gov/files/nrsro-summary-report-2019.pdf. 
38 Available at https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf. 
39 84 FR at 40250. 

8 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/files/nrsro-summary-report-2019.pdf
https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf
https://Release.39
https://15E(p)(3)(C).37


  

 
 
 

 
 

 
 

 
 

 

 
 

 
 

 
 

 
 

 
  

 

   
 
 
 

 
  

 

  
 

 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 

  
 

 IV. Competition 

A. SELECT NRSRO STATISTICS 

S
ections 1 through 3 below summarize and 
discuss certain information reported by 
NRSROs on Form NRSRO or pursuant 
to Rule 17g-3 that provides insight into 

the state of competition among NRSROs. While 
this information indicates that the larger NRSROs 
continue to account for the highest percentages of 
outstanding ratings, other information suggests that 
smaller NRSROs have gained ratings share in certain 
asset classes.40 

1. NRSRO Credit Ratings Outstanding 

Each NRSRO annually reports the number of credit 
ratings outstanding, as of the end of the preceding 
calendar year, in each rating category for which it is 
registered.41 This information, for the calendar year 
ending December 31, 2019, is summarized in Charts 
2 through 5 below and can be useful in determining 
the breadth of an NRSRO’s coverage with respect 
to issuers, obligors, and securities or money market 
instruments within a particular rating category. 

Chart 2 depicts the number of credit ratings each 
NRSRO had outstanding in each rating category 

for which it was registered as of December 31, 
2019. Chart 3 shows the percentage of credit ratings 
each NRSRO had outstanding across all rating 
categories and also breaks out the percentages 
for each NRSRO in each of the rating categories. 
Chart 4 illustrates the relative size of each rating 
category based on the aggregate number of ratings 
reported outstanding by all NRSROs. Chart 5 
depicts the percentage of ratings each NRSRO had 
outstanding across all rating categories other than 
the government securities category. 

Comparing the number of ratings outstanding for 
established NRSROs and newer NRSROs may not 
provide as comprehensive a picture of the state of 
competition as comparing the number of ratings 
issued by such NRSROs in a given period. Certain 
NRSROs (particularly the larger NRSROs) have 
a longer history of issuing ratings and their ratings 
include those for debt obligations and obligors that 
were rated well before the establishment of the 
newer entrants.42 Consequently, the information 
described in Section IV.B of this Report (relating 
to recent market share developments in the asset-
backed securities rating category) may provide 

40 As discussed in Section IV.B.1 of this Report, information available on the websites of Commercial Mortgage Alert 
(https://www.cmalert.com/) and Asset-Backed Alert (https://www.abalert.com/) regarding NRSRO market shares in the 
asset-backed securities category indicates that some of the smaller NRSROs have developed significant market shares in 
such rating category over the past few years. In addition, Section IV.B.2 of this Report provides examples of certain asset 
classes in which it has been reported that smaller NRSROs have gained market share. 

41 Annual certifications on Form NRSRO must be filed with the Commission on EDGAR pursuant to Rule 17g-1(f) and 
made publicly available without cost on each NRSRO’s website pursuant to Rule 17g-1(i). The number of outstanding 
credit ratings for each rating category for which an NRSRO is registered is reported on Item 7A of Form NRSRO. 

42 The ratings counts disclosed on Item 7A of Form NRSRO include outstanding credit ratings, regardless of when they were 
issued. As a result, the ratings counts of the more established NRSROs may include credit ratings that were issued before 
the newer entrants began issuing credit ratings. These earlier ratings will continue to be included in the disclosed ratings 
counts until the credit ratings are withdrawn, either because the rated securities have been repaid or otherwise. Because 
outstanding ratings are included in the ratings counts, historical results factor significantly into the disclosed number of 
ratings, making it more difficult to discern current-year trends and identify gains achieved by the newer entrants. 

A N N U A L  R E P O R T  |  9 

https://www.cmalert.com/
https://www.abalert.com/
https://entrants.42
https://registered.41
https://classes.40


  

 
 

 
 

 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 

 
  

 
 
 
 

 
 

  
 

 

  

  

 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 

 
 

 
 

 

additional insight regarding how newer entrants are 
competing with more established rating agencies, 
specifically in the asset-backed securities rating 
category. 

There are additional limitations to assessing the 
state of competition in each rating category and in 
the aggregate based on the number of outstanding 
ratings. For instance, some NRSROs have pursued 
business strategies to specialize in particular rating 
categories or sub-categories43 and may not desire 
to issue ratings in certain of the other NRSRO 
rating categories. Also, the reported information 
does not reflect any credit ratings being issued by 
NRSROs in rating categories in which they are not 
registered with the Commission, nor does it reflect 
ratings issued by an affiliate of an NRSRO unless 
the affiliate is identified as a credit rating affiliate on 
Item 3 of Form NRSRO. 

Further, when reporting its outstanding ratings, 
each NRSRO makes its own determination of the 
applicable rating category into which each of its 
ratings falls. The classification of ratings into the five 
rating categories is not necessarily consistent across 
NRSROs. In addition, to the extent NRSROs have 
adjusted their ratings count disclosures in accordance 
with the amended Instructions to Form NRSRO, 
it may be more difficult to draw comparisons to 
ratings counts disclosed in prior years.44 

Chart 2 provides the number of outstanding credit 
ratings reported by each NRSRO in its annual certi-
fication for the calendar year ending December 31, 
2019, in each of the five rating categories identified 
in Section 3(a)(62) for which the NRSRO is regis-
tered, as applicable. 

Chart 3 displays the percentage of each NRSRO’s 
outstanding credit ratings of the total outstanding 
credit ratings of all NRSROs, for each rating 
category in which the NRSRO was registered, as 
reported by each NRSRO in its annual certification 
for the calendar year ending December 31, 2019.45 

The larger NRSROs account for 95.1% of all 
the ratings outstanding as of December 31, 
2019—slightly lower than their 95.4% share as 
of December 31, 2018.46 The share of outstanding 
credit ratings of the larger NRSROs decreased in 
three of the five categories, most significantly in the 
asset-backed securities category, which decreased by 
2.3 percentage points. 

Charts 2 and 3 also show that AMB, one of the 
smaller NRSROs, had the most credit ratings 
outstanding in the insurance category. In each of the 
past six years, AMB reported that it had the most 
credit ratings outstanding in the insurance category.47 

43 For example, AMB has traditionally focused on rating insurance companies and their affiliates. 
44 Effective January 1, 2015, Item 7A of Form NRSRO and the corresponding Instructions were amended to clarify the 

manner in which the number of outstanding credit ratings should be calculated and presented. The clarifying amendments 
were designed to help ensure that disclosures on Item 7A of Form NRSRO are consistent across NRSROs. The change 
in Instructions may have caused some NRSROs to modify the way they count ratings for purposes of Item 7A of Form 
NRSRO, which may affect comparisons to disclosures made in prior years. See Nationally Recognized Statistical Rating 
Organizations, Release No. 34-72936 (Aug. 27, 2014), 79 FR 55077, 55220-22 (Sept. 15, 2014) (“2014 Adopting 
Release”), available at https://www.govinfo.gov/content/pkg/FR-2014-09-15/pdf/2014-20890.pdf (discussing the clarifying 
amendments to Item 7A of Form NRSRO). 

45 For example, according to Chart 2, AMB reported that it had 7,171 insurance company credit ratings, and the total of 
the credit ratings in that category reported by all NRSROs was 20,990. Therefore, the percentage of NRSRO insurance 
company ratings attributable to AMB was approximately 34.2% (i.e., 7,171 divided by 20,990, expressed as a percentage), 
as shown on Chart 3. 

46 In 2007, the year when NRSROs began reporting outstanding ratings on Form NRSRO, these three NRSROs accounted 
for 98.8% of all outstanding ratings. 

47 See Annual Reports for prior years, which can be found under “Annual Reports to Congress” in the “Reports and Studies” 
section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html. 

10 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.govinfo.gov/content/pkg/FR-2014-09-15/pdf/2014-20890.pdf
https://www.sec.gov/ocr/ocr-reports-and-studies.html
https://category.47
https://years.44


  

     

 

     

 

 

 

Chart 2: Number of Outstanding Credit Ratings as of December 31, 2019 by Rating Category* 

NRSRO 
Financial 

Institutions 
Insurance 

Companies 
Corporate 

Issuers 
Asset-Backed 

Securities 
Government 

Securities 
Total Ratings 

AMB N/R 7,171 998 5 N/R 8,174 

DBRS 10,592 166 4,185 22,217 20,699 57,859 

EJR 9,752 881 7,321 N/R N/R 17,954 

Fitch 35,312 3,302 20,193 34,080 185,367 278,254 

HR 677 N/R 313 N/R 401 1,391 

JCR 949 78 2,797 N/R 339 4,163 

KBRA 1,101 106 220 12,791 135 14,353 

MIS 35,583 2,516 31,908 49,388 562,320 681,715 

S&P 55,608 6,770 55,118 36,539 914,907 1,068,942 

Total 149,574 20,990 123,053 155,020 1,684,168 2,132,805 

* N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date. 

Source: NRSRO annual certifications for the 2019 calendar year, Item 7A on Form NRSRO. 

Chart 3: Percentage by Rating Category of Each NRSRO’s Outstanding Credit Ratings of the Total 
Outstanding Credit Ratings of all NRSROs as of December 31, 2019* 

NRSRO 
Financial 

Institutions 
Insurance 

Companies 
Corporate 

Issuers 
Asset-Backed 

Securities 
Government 

Securities 
Total Ratings 

AMB N/R 34.2% 0.8% 0.0% N/R 0.4% 

DBRS 7.1% 0.8% 3.4% 14.3% 1.2% 2.7% 

EJR 6.5% 4.2% 5.9% N/R N/R 0.8% 

Fitch 23.6% 15.7% 16.4% 22.0% 11.0% 13.0% 

HR 0.5% N/R 0.3% N/R 0.0% 0.1% 

JCR 0.6% 0.4% 2.3% N/R 0.0% 0.2% 

KBRA 0.7% 0.5% 0.2% 8.3% 0.0% 0.7% 

MIS 23.8% 12.0% 25.9% 31.9% 33.4% 32.0% 

S&P 37.2% 32.3% 44.8% 23.6% 54.3% 50.1% 

* N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date. 

Percentages have been rounded to the nearest one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 calendar year, Item 7A on Form NRSRO. 

A N N U A L  R E P O R T  |  11 



  

  
  

  
  

 
 

 
 

 
 
 
 
 
 

 

 
 

 
 

 

 
 

 
 
 

 
 

 
 

 
 

  

 

  

 

 
  

 Chart 4: Breakdown of Ratings Reported Chart 5: Breakdown of Non-Government 
Outstanding as of December 31, 2019* Securities Ratings Reported Outstanding as of 

December 31, 2019* 

79.0% 

7.0% 

5.8%1.0% 
7.3% 

Government Securities 79.0% 
Financial Institutions 7.0% 
Insurance Companies 1.0% 
Corporate Issuers 5.8% 
Asset-Backed Securities 7.3% 

* Percentages have been rounded to the nearest 

one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 

calendar year, Item 7A on Form NRSRO. 

Chart 4 depicts the percentages of outstanding 
credit ratings attributable to each rating category, 
as reported by the NRSROs in their annual 
certifications for the calendar year ending 
December 31, 2019. 

As illustrated by Chart 4, as of December 31, 2019, 
the largest proportion of the aggregate credit ratings 
reported to be outstanding were in the government 
securities category, which may be attributable to the 
large number of government bond issuers and their 
multiple debt offerings. The government securities 
category accounted for 79.0% of the total number 
of credit ratings reported across all categories and, 
as shown on Chart 3, is also the most concentrated 
rating category, with the larger NRSROs accounting 
for 98.7% of all outstanding government ratings. 

0.9% 
0.2% 

1.8% 

34.3% 

26.6% 

3.2% 

8.3% 

4.0% 

20.7% 

HR 0.2% 
AMB 1.8% 
S&P 34.3% 

JCR 0.9% 
DBRS 8.3% KBRA 3.2% 
EJR 4.0% MIS 26.6% 
Fitch 20.7% 

* Percentages have been rounded to the nearest 

one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 

calendar year, Item 7A on Form NRSRO. 

Chart 5 depicts the percentages of the credit 
ratings outstanding that are attributable to each 
NRSRO over all the rating categories other than the 
government securities category, as reported by each 
NRSRO in its annual certification for the calendar 
year ending December 31, 2019. 

A comparison of Chart 5 to Chart 3 (which shows 
each NRSRO’s share of outstanding ratings over 
all the rating categories, including government 
securities) illustrates that there is less concentration 
in the non-government securities rating categories. 
S&P’s and MIS’s percentage share of all outstanding 
ratings declines by 15.8 and 5.4 percentage points, 
respectively, when government securities are 
excluded. Fitch’s percentage share of outstanding 
ratings, on the other hand, increases by 7.7 
percentage points when government securities are 

12 |  O F F I C E  O F  C R E D I T  R A T I N G S  



  

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
 

 
 

 
 
 

 
 

 

 
 

 
 

 

  
 

 

  
 

 

  
 

 

  

 
 

 

 

 

 

 

 
 

 
 
 

 
 

 
 
 

 
 

excluded. The percentage share for all the remaining 
NRSROs also increases when government securities 
are excluded. 

Further, when government securities are included in 
the total calculation, each of the smaller NRSROs, 
except for DBRS, has less than 1.0% of all 
outstanding ratings, making it difficult to assess their 
relative rating shares. When government securities 
are excluded, a clearer picture of the relative 
percentage shares of the smaller NRSROs in the 
categories in which they are active can be observed, 
as illustrated in Chart 5. The percentage share of 
each smaller NRSRO for all rating categories other 
than government securities as of December 31, 
2019 did not change significantly compared to their 
percentage share as of December 31, 2018.48 

As discussed above, Charts 2 through 5 reflect the 
number and percentages, respectively, of credit 
ratings outstanding as of December 31, 2019, which 
may include credit ratings that were issued years 
ago. As a result, the measure may not be indicative 
of the current market position of each NRSRO 
with respect to newly issued credit ratings. For a 
discussion of recent market share developments in 
the asset-backed securities rating category and other 
developments that could impact NRSRO market 
share, see Section IV.B of this Report. 

2. NRSRO Analytical Staffing Levels 

Chart 6 reports the number of credit analysts 
(including credit analyst supervisors) and the 
number of credit analyst supervisors employed by 
each of the NRSROs, as reported on Exhibit 8 to 
Form NRSRO.49 

Chart 6: NRSRO Credit Analysts 
and Credit Analyst Supervisors 

NRSRO 
Credit Analysts 

(Including Credit 
Analyst Supervisors) 

Credit Analyst 
Supervisors 

AMB 154 55 

DBRS 475 110 

EJR 23 12 

Fitch 1,277 312 

HR 52 10 

JCR 62 30 

KBRA 172 48 

MIS 1,732 278 

S&P 1,559 119 

Total 5,506 974 

Source: Exhibit 8 to Form NRSRO, in effect as of each 

NRSRO’s annual certification for the 2019 calendar 

year filed on or before March 30, 2020. 

The larger NRSROs report employing 4,568 credit 
analysts (including supervisors), which is approxi-
mately 83.0% of the total number employed by all 
of the NRSROs. Although the smaller NRSROs in 
the aggregate employ only approximately 17.0% 
of all credit analysts employed by NRSROs, this 
percentage has increased steadily in recent years.50 

During this time, some of the smaller NRSROs have 
reported significant increases in their analytical staff. 
Between the 2018 and 2019 calendar years, the 
number of credit analysts (including credit analyst 
supervisors) employed by smaller NRSROs, in the 
aggregate, increased 13.7%, compared to an increase 
of 0.6% at the larger NRSROs, in the aggregate. 

48 A comparison of Chart 5 in this Report with Chart 4 in Section IV.A.1 of the January 2020 Annual Report (available at 
https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf) shows that, except for DBRS, each smaller NRSRO’s total 
non-government market share as of December 31, 2019 remained constant or increased modestly (the largest increase was 
0.4% by KBRA) compared to the market shares as of December 31, 2018. 

49 Effective January 1, 2015, the Instructions for Exhibit 8 to Form NRSRO were amended to clarify that NRSROs must 
include credit analyst supervisors in the total number of credit analysts disclosed on Exhibit 8. This amendment was 
designed to enhance consistency of the disclosures on Exhibit 8 of Form NRSRO. See 2014 Adopting Release, 79 FR at 
55222 (discussing the clarifying amendments to Exhibit 8 of Form NRSRO). 

50 Based on reports by the NRSROs on their annual certifications for the applicable calendar year, the smaller NRSROs 
employed approximately 11.4% of all NRSRO analysts in 2014, 12.8% of all NRSRO analysts in 2015, 14.6% of all 
NRSRO analysts in 2016, 15.2% of all NRSRO analysts in 2017, and 15.4% of all NRSRO analysts in 2018. 

A N N U A L  R E P O R T  |  13 

https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf
https://years.50
https://NRSRO.49


  

 
 
 

 
 

 
 

 

 
 

 
 

  
 

 

   

   
 

 
 

  
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
 

 
 

 
 

 
 

 
 

 
 

  
 
 
 
 
 
 

  
 

 

 

 

 

 

 

 

 

3. NRSRO Revenue 

Chart 7 shows the percentage of total NRSRO 
revenues since 2016 that were accounted for by the 
larger NRSROs in the aggregate and by the smaller 
NRSROs in the aggregate.51 The percentage of 
aggregate NRSRO revenue reported by the larger 
NRSROs has gradually declined over this time 
period and the percentage of total revenue reported 
by the smaller NRSROs has correspondingly 
gradually increased. 

Chart 7: NRSRO Revenue Information: 
Fiscal Year Percentage of Total Reported 

NRSRO Revenue 

2019 2018 2017 2016 

Larger 
NRSROs 

93.3% 93.5% 94.1% 94.4% 

Smaller 
NRSROs 

6.7% 6.5% 5.9% 5.6% 

Total 100.0% 100.0% 100.0% 100.0% 

Source: Financial reports filed with the Commission 

under Rule 17g-3(a)(3) for the fiscal years ended 

2016 through 2019. For the preparation of this 

Report, if an NRSRO reported revenue in a foreign 

currency, the revenue was converted to U.S. dollars 

using the average exchange rate over all U.S. 

banking days in the fiscal year of such NRSRO. 

Further revenue information is available for 
NRSROs that are owned, in whole or in part, by 
public companies. The following information is from 
the 2019 annual reports of public companies with an 
ownership interest in an NRSRO: 

§	Moody’s Corporation, which is MIS’s parent 
company, reported a 6% increase in external 
revenue at MIS compared to 2018 results. 
The increase, according to the report, reflects 
higher revenue from rating corporate debt 
(both investment-grade and high-yield) resulting 
from both higher volumes of rated issuances 
reflecting favorable market conditions and 
favorable product mix. The report notes that the 
increase in revenue at MIS was partially offset 
by a decline in activity in bank loans and the 
CLO asset class primarily resulting from higher 
borrowing costs and shift in investor demand 
to fixed-rate instruments. The corporate finance 
group, financial institutions group, and public, 
project and infrastructure finance group of MIS 
had an increase in revenue compared to 2018 
results.52 

§	S&P Global Inc. (“S&P Global”), which is 
S&P’s parent company, indicated that revenue 
at S&P increased by 8% compared to its 
2018 results, due to an increase in transaction 
revenue. S&P Global attributed the increase 
in S&P’s revenue to an increase in corporate 
bond ratings revenue primarily driven by higher 
corporate bond issuance in the U.S. and Europe, 
which was partially offset by lower bank loan 
ratings revenue driven by reduced U.S. issuance 
volumes. The report also noted an increase in 
public finance revenue from increased issuance 
contributed to transaction revenue growth.53 

51 Under Rule 17g-3(a)(3), each NRSRO is required to file annually with the Commission an unaudited report providing 
revenue information, including revenue from determining and maintaining credit ratings, revenue from subscribers, revenue 
from granting licenses or rights to publish credit ratings, and revenue from other services and products. These reports are 
not required to be made publicly available by the NRSROs 

52 See Moody’s Corporation, Annual Report on Form 10-K for the year ended December 31, 2019, available at 
https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000005/mco-20191231.htm. 

53 See S&P Global, Annual Report on Form 10-K for the year ended December 31, 2019, available at 
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000055/spgi-20191231x10k.htm. 

14 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000005/mco-20191231.htm
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000055/spgi-20191231x10k.htm
https://growth.53
https://results.52
https://aggregate.51


  

 
 

 
 
 
 

 
 

 

 
 

 
 
 

 
 

 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

   

   

   
 

   

 
 

 
 

 
 

 
 
 

 

 
 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
 

 

§	Morningstar, Inc. indicated that NRSRO revenue 
for the twelve months ended December 31, 2018 
reflects MCR; NRSRO revenue for the first six 
months of 2019 includes revenue from MCR; 
and NRSRO revenue for the third and fourth 
quarters of 2019 includes revenue from DBRS, 
the newly combined credit ratings operations. 
For the six months ended December 31, 2019, 
approximately 63% of the revenue generated by 
DBRS was derived from one-time, transaction-
based fees driven by its provision of ratings on 
newly-issued securities; whereas the remainder 
can be classified as transaction-related, with 
recurring annual fees tied to surveillance, credit 
research, or other services. The combination of 
pre-integration DBRS and MCR’s U.S.-based 
credit ratings operations in 2019 makes it 
difficult to ascribe the origin of revenue growth 
to either entity. In 2019, Morningstar, Inc.’s 
consolidated revenue rose $159.1 million, or 
15.6%. DBRS contributed $91.3 million of 
revenue growth during 2019.54 

Recent regulatory filings also show increases in 
revenue at MIS and S&P in the first half of 2020. 
Moody’s Corporation reported a 23% increase 
in MIS external revenue in the first half of 2020, 
as compared to the first half of 2019, due to 
higher investment-grade rated issuance volumes 
as corporate issuers bolstered liquidity positions in 
response to COVID-19 uncertainties coupled with 
strong speculative-grade issuance despite a severe 
market disruption late in the first quarter.55 S&P 

Global reported a 22% increase in S&P revenue in 
the first half of 2020, as compared to the first half 
of 2019, primarily due to an increase in transaction 
revenue. S&P Global attributed the increased 
revenue to an increase in corporate bond ratings 
revenue primarily driven by higher corporate bond 
issuance in the U.S. mainly resulting from histori-
cally low borrowing costs and central bank lending 
actions that initially were announced at the end of 
the first quarter of 2020, which was partially offset 
by a decrease in bank loan ratings revenue.56 

Morningstar, Inc. indicated that NRSRO revenue for 
the six months ended June 30, 2019 reflects MCR; 
NRSRO revenue for the six months ended June 30, 
2020 reflects DBRS, the combined credit ratings 
operations. The combination of pre-integration 
DBRS and MCR’s U.S.-based credit ratings opera-
tions in 2019 makes it difficult to ascribe the origin 
of revenue growth to either entity. Morningstar, 
Inc. reported that many new issuance segments 
of the transaction-based credit rating business in 
both Europe and the U.S. slowed or paused during 
the second quarter as the pandemic persisted. 
However, DBRS benefited from record corporate 
issuance volumes in Canada, as many Canadian 
investment grade issuers accelerated their full year 
issuance plans into the second quarter. In the first six 
months of 2020, Morningstar, Inc.’s consolidated 
revenue increased 19.7% to $327.9 million. DBRS 
contributed $76.3 million of revenue growth during 
the first six months of 2020.57 

54 See Morningstar, Inc., Annual Report on Form 10-K for the year ended December 31, 2019, available at 
https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000041/morn10k12312019.htm. 

55 See Moody’s Corporation, Quarterly Report on Form 10-Q for the period ended June 30, 2020, available at 
https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000019/mco-20200630.htm. 

56 See S&P Global, Quarterly Report on Form 10-Q, for the period ended June 30, 2020, available at 
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000144/spgi-20200630.htm. 

57 See Morningstar, Inc., Quarterly Report on Form 10-Q for the period ended June 30, 2020, available at 
https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000161/morn-20200630.htm. 

A N N U A L  R E P O R T  |  15 

https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000041/morn10k12312019.htm
https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000019/mco-20200630.htm
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000144/spgi-20200630.htm
https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000161/morn-20200630.htm
https://revenue.56
https://quarter.55


  

 
 

 

  

 
 
 

 
 

 
 
 

 
 

 
 

  
 
 
 
 

   
 

 
 

 
 

  
 

  
 
 

 

  
 

  

  
 

  

  
 

 
 

 

 

 
 
 

 
 

 
 

 
 
 

 
 
 
 
 

B. RECENT DEVELOPMENTS IN THE 
STATE OF COMPETITION AMONG 
NRSROs 

1. Market Share Observations in the 

Asset-Backed Securities Rating Category 

As noted in Section IV.A.1 of this Report, the 
number of ratings recently issued by NRSROs 
may give a clearer picture of competition than 
the number of ratings each NRSRO currently has 
outstanding. For example, Chart 3 indicates that, 
as of December 31, 2019, the smaller NRSROs 
collectively have 22.6% of the ratings outstanding in 
the asset-backed securities rating category. However, 
the market share data discussed in this Section 
IV.B show that higher market share percentages 
have been obtained by smaller NRSROs in ratings 
issuance with respect to certain types of asset-backed 
securities. This market share data continues the 

growth trend the Staff has observed since the 2012 
Annual Report for some smaller NRSROs in the 
asset-backed securities rating category. 

Sections (a) and (b) below discuss NRSRO market 
share information with respect to certain asset-
backed securities, as reported on the Commercial 
Mortgage Alert and Asset-Backed Alert websites.58 

Commercial Mortgage Alert shares information on 
one category of asset-backed securities: CMBS.59 

Asset-Backed Alert reports NRSRO market share 
information on three categories of asset-backed 
securities: (i) ABS;60 (ii) MBS;61 and (iii) CLO.62 

(a) CMBS 

Charts 8 through 11 provide information concerning 
U.S.63 CMBS ratings by NRSROs,64 as reported in 
the Commercial Mortgage Alert. NRSRO market 
share varies between the conduit CMBS and single-

58 See Commercial Mortgage Alert website, available at https://www.cmalert.com/ and Asset-Backed Alert website, available 
at https://www.abalert.com/. The information in Charts 8 through 11 is based on the Commercial Mortgage Alert website 
as of September 17, 2020, and the information in Charts 12 through 14 is based on the Asset-Backed Alert website as of 
September 17, 2020. Although the information available on these websites may provide insight into recent developments 
regarding the state of competition among NRSROs in the asset-backed securities rating category, it has certain limitations. 
For instance, the information treats each transaction as one undivided whole. An NRSRO is counted as having rated a 
transaction, and the aggregate amount of securities issued, even if the NRSRO rated only a portion of it. 

59 The “CMBS” category is comprised of transactions collateralized by mortgages or leases on commercial or multi-family 
income-producing properties (excluding commercial real estate collateralized debt obligations). See Commercial Mortgage 
Alert website, available at https://www.cmalert.com/. 

60 The “ABS” category is comprised of securities that are collateralized by assets other than the following: CMBS; MBS; 
Fannie Mae and Freddie Mac issues (other than risk transfer transactions); issuances by municipalities; tax exempt issues; 
issues that are fully retained by an affiliate of the deal sponsor; commercial paper and other continuously offered securities 
such as medium-term notes; CLOs and other collateralized debt obligations; and refinancings of previously offered 
securities. See Asset-Backed Alert website, available at https://www.abalert.com/. 

61 The “MBS” category is comprised of securities secured by U.S. first-lien mortgages on residential properties (excluding 
Fannie Mae and Freddie Mac issues, securities secured by non-performing or re-performing mortgages, subprime 
mortgages, or mortgages financing single-family rental businesses, and refinancings of previously offered securities). See id. 

62 The “CLO” category is comprised of arbitrage collateralized loan obligations secured by broadly syndicated corporate 
loans and middle market collateralized loan obligations secured by loans to small to medium sized enterprises. See id. 

63 References to “U.S.” CMBS, MBS, ABS, and CLO issuance and market shares in this Section IV.B.1 and Section IV.B.2 
reflect securities issued for sale primarily in the U.S., which include securities issued publicly and those issued under Rule 
144A under the Securities Act of 1933, as amended (the “Securities Act”). See Asset-Backed Alert website, available at 
https://www.abalert.com/; Commercial Mortgage Alert website, available at https://www.cmalert.com/. 

64 For purposes of Charts 8 through 11, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated 
and presented for DBRS. This includes information for all of 2018 and 2019. Please refer to the January 2020 and 
December 2018 Annual Reports for information for pre-integration DBRS and MCR. 

16 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.abalert.com/
https://www.cmalert.com/
https://www.abalert.com/
https://www.abalert.com/
https://www.cmalert.com/
https://www.cmalert.com
https://websites.58borrower CMBS segments,65 the two segments 
that account for most of the non-agency66 U.S. 
CMBS transactions rated by NRSROs. The charts 
include reported market share information for total 
non-agency U.S. CMBS transactions,67 U.S. conduit 
CMBS transactions, U.S. single-borrower CMBS 
transactions, and agency CMBS transactions68 for 
calendar year 2018, calendar year 2019, and the first 
half of calendar year 2020. 

Charts 8 through 10 show that in 2018, 2019, and 
the first half of 2020 the larger NRSROs generally 
obtained the highest market shares in rating 
non-agency U.S. CMBS transactions, but smaller 
NRSROs have achieved significant market shares as 
well. In the first half of 2020, each NRSRO active 
in rating non-agency U.S. CMBS had market shares 
greater than 34.9%. 

S&P has continued to gain market share in the U.S. 
conduit CMBS segment. S&P had the second-highest 
market share in this segment during 2019 and 
the first half of 2020, rating more than half of the 
transactions over that period. KBRA had the second-
highest market share in the U.S. conduit CMBS 

segment in 2018, and the third-highest ranking in 
2019 and the first half of 2020. In each of 2017, 
2018, 2019, and the first half of 2020, KBRA has 
rated more than half of these transactions. 

The relative size (proportionate to total U.S. CMBS 
issuance) of the U.S. single-borrower segment had 
been almost half of the non-agency U.S. CMBS 
transactions for the past two years. However, in 
the first half of 2020, due to a decline in issuance, 
the U.S. single-borrower segment accounted for 
about a third of all non-agency U.S. CMBS transac-
tions. KBRA gained market share in this segment, 
achieving the second highest market share in the 
first half of 2020, albeit rating only three out of the 
twenty transactions in the segment.69 

As illustrated in Chart 11, smaller NRSROs gained 
market share in the agency CMBS segment. In 2019 
and the first half of 2020, KBRA and DBRS had the 
second and third-highest market shares, respectively, 
each rating approximately half of the agency CMBS 
transactions. 

65 The term “conduit” refers to a financial intermediary that functions as a link, or conduit, between the lender(s) originating 
loans and the ultimate investor(s). The conduit makes loans or purchases loans from third party correspondents under 
standardized underwriting parameters and once sufficient volume has accumulated, pools the loans for sale to investors 
in the CMBS market. See https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20 
Revised%202014%20-Update.pdf. In contrast, a single-borrower transaction includes commercial mortgage loans made to 
a single-borrower. 

66 “Non-agency” CMBS refers to CMBS that are not issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. 
“Agency” CMBS generally refers to CMBS that are issued or guaranteed by such entities. 

67 Total U.S. CMBS transactions include conduit CMBS, single-borrower CMBS, and other types of CMBS, such as 
distressed/non-performing CMBS transactions and re-securitizations of CMBS transactions. 

68 Only agency CMBS transactions with a rating from one or more NRSROs are included for determining NRSRO market 
share in the agency CMBS category. See Commercial Mortgage Alert website, available at https://www.cmalert.com/. 

69 The coronavirus pandemic contributed to a slowdown in the issuance of CMBS transactions in the first half of 2020, which 
impacted the NRSROs’ market shares in certain CMBS segments. In particular, the NRSROs’ market shares in the U.S. 
single-borrower segment were skewed because one transaction accounted for a third of the volume in the first half of 2020. 
See Commercial Mortgage Alert, July 17, 2020. 

A N N U A L  R E P O R T  |  17 

https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20Revised%202014%20-Update.pdf.
https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20Revised%202014%20-Update.pdf.
https://www.cmalert.com/
https://segment.69


  

 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

  

  
 

  
 

 
 

  
 

 
 

  
 

 
    

  
 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

 

  

 

 

 

Chart 8: Rating Agency Market Share for Total Non-Agency U.S. CMBS Issued 
in 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 
Rank Issuance deals Share Issuance deals Share Issuance deals Share 

($Mil.) (%) ($Mil.) (%) ($Mil.) (%) 

1 Fitch 23,369 26 77.8 56,048 66 57.3 50,422 63 65.5 

2 KBRA 14,383 15 47.9 45,924 56 47.0 30,302 38 39.4 

3 S&P 11,850 13 39.5 49,634 70 50.8 34,764 58 45.2 

4 DBRS 11,286 17 37.6 42,425 56 43.4 38,801 58 50.5 

5 MIS 10,476 19 34.9 42,184 55 43.1 32,851 44 42.7 

Total 
Rated 30,035 43 97,767 143 76,936 122 
Market 

* Chart 8 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

Chart 9: Rating Agency Market Share for U.S. Conduit CMB
in 2018, 2019, and First Half of 2020* 

S Issued 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 Fitch 15,313 16 100.0 49,154 52 100.0 40,249 44 100.0 

2 S&P 9,738 9 63.6 35,582 36 72.4 19,358 19 48.1 

3 KBRA 8,947 10 58.4 32,755 36 66.6 22,610 26 56.2 

4 DBRS 6,366 6 41.6 18,318 18 37.2 17,640 18 43.8 

5 MIS 4,848 6 31.7 14,836 17 30.2 20,891 25 51.9 

Total 
Rated 
Market 

15,313 16 49,154 52 40,249 44 

* Chart 9 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

18 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.cmalert.com/
https://www.cmalert.com/


  

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

  

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

Chart 10: Rating Agency Market Share for U.S. Single-Borrower CMBS Issued 
in 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 
Rank Issuance deals Share Issuance deals Share Issuance deals Share 

($Mil.) (%) ($Mil.) (%) ($Mil.) (%) 

1 Fitch 5,816 7 57.0 6,894 14 15.0 9,783 18 27.9 

2 KBRA 4,505 3 44.2 12,506 18 27.2 7,692 12 22.0 

3 MIS 3,396 9 33.3 26,518 36 57.6 11,796 18 33.7 

4 DBRS 2,688 7 26.4 23,368 35 50.7 20,864 38 59.6 

5 S&P 501 2 4.9 12,638 30 27.4 14,410 37 41.2 

Total 
Rated 10,201 20 46,060 83 35,003 73 
Market 

* Chart 10 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

Chart 11: Rating Agency Market Share for Agency CMBS Issued in 2018, 2019, and First Half of 2020* 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 Fitch 11,141 9 100.0 16,767 12 59.2 14,256 11 58.3 

2 KBRA 6,416 5 57.6 12,311 9 43.5 11,343 9 46.4 

3 DBRS 4,725 4 42.4 15,995 11 56.5 11,633 9 47.6 

4 MIS 0 0 0.0 5,862 4 20.7 9,011 7 36.9 

5 S&P 0 0 0.0 5,677 4 20.1 2,650 2 10.8 

Total 
Rated 
Market 

11,141 9 28,306 20 24,446 19 

* Chart 11 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

A N N U A L  R E P O R T  |  19 

https://www.cmalert.com/
https://www.cmalert.com/


  

 
 

 
 
 

 
 

 
 

 
 
 

 
 

  
 

  
 

  
 

  

 
 

 
 

 
 

 

 
 

 
 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

(b) ABS/MBS/CLO 

Charts 12 through 14 provide information 
concerning U.S. ABS, U.S. MBS, and U.S. CLO 
ratings by NRSROs,70 as reported in the Asset-
Backed Alert. The charts include reported market 
share information for these transactions for calendar 
years 2018, calendar year 2019, and the first half of 
calendar year 2020. 

Chart 12 shows that smaller NRSROs, in particular 
DBRS and KBRA, have built and maintained 
significant U.S. ABS rating market shares.71 DBRS 
has consistently attained a marketshare of over 
20% in each of 2018, 2019, and the first half of 
2020, and KBRA has maintained a market share of 
approximately 17.5% during the same time period.72 

Chart 13 shows that for the U.S. MBS market, 
KBRA obtained the third-highest market share in 
2018, and then the second-highest market shares in 
2019 and the first half of 2020. DBRS also obtained 
a large ratings share of this market, maintaining a 
market share of over 30% in 2018, 2019, and the 
first half of 2020. 

Chart 14 shows that the larger NRSROs have the 
highest market shares in the U.S. CLO segment. 
However, DBRS has attained some market share in 
the U.S. CLO segment, and KBRA began rating such 
transactions in 2019.73 

Chart 12: Rating Agency Market Shares for U.S. ABS Issued in 2018, 2019, and First Half of 2020* 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 S&P 77,262 113 63.3 192,315 313 57.4 184,537 296 57.8 

2 MIS 57,130 76 46.8 143,742 203 42.9 153,642 215 48.2 

3 Fitch 46,549 65 38.1 151,090 192 45.1 154,878 205 48.5 

4 DBRS 30,525 72 25.0 106,894 200 31.9 95,937 183 30.1 

5 KBRA 22,534 68 18.5 64,909 177 19.4 55,990 147 17.5 

Total 
Rated 
Market 

122,133 219 334,868 584 319,052 555 

* Chart 12 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Asset-Backed Alert website, available at 

https://www.abalert.com/. The Staff has adjusted the presentation of the information by aggregating individual 

pre-integration DBRS and MCR information to present the information consistently as a combined entity, DBRS. 

See note 70. 

70 For purposes of Charts 12 through 14, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated 
and presented for DBRS. This includes information for all of 2018 and 2019. Please refer to the January 2020 and 
December 2018 Annual Reports for information for pre-integration DBRS and MCR. 

71 See Section IV.B.2 of this Report for a discussion of specific ABS asset classes where the smaller NRSROs have reported 
success in gaining market share. 

72 COVID-19 contributed to a slowdown in the issuance of U.S. ABS transactions in the first half of 2020. See Asset-Backed 
Alert, July 3, 2020. 

73 COVID-19 contributed to a slowdown in the issuance of CLO transactions in the first half of 2020, which impacted the 
NRSROs’ market shares in this sector. See Asset-Backed Alert, July 10, 2020; Asset-Backed Alert, July 3, 2020. 

20 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.abalert.com/
https://period.72
https://shares.71


  

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

  
 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

 Chart 13: Rating Agency Market Shares for U.S. MBS Issued in 2018, 2019, and First Half of 2020* 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 MIS 8,149 16 54.7 19,074 44 67.4 17,245 36 67.3 

2 KBRA 7,762 17 52.1 13,126 33 46.4 11,757 27 45.9 

3 Fitch 6,959 21 46.7 8,664 29 30.6 10,610 28 41.4 

4 DBRS 4,692 10 31.5 11,871 27 42.0 15,367 29 60.0 

5 S&P 265 1 1.8 2,788 7 9.9 5,302 8 20.7 

Total 
Rated 
Market 

14,894 37 28,296 78 25,617 60 

* Chart 13 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Asset-Backed Alert website, available at 

https://www.abalert.com/. The Staff has adjusted the presentation of the information by aggregating individual 

pre-integration DBRS and MCR information to present the information consistently as a combined entity, DBRS. 

See note 70. 

Chart 14: Rating Agency Market Shares for 
U.S. CLO Issued in First Half of 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 
Rank Issuance deals Share Issuance deals Share Issuance deals Share 

($Mil.) (%) ($Mil.) (%) ($Mil.) (%) 

1 S&P 30,709 70 83.4 73,791 152 60.1 64,030 117 48.3 

2 Fitch 20,818 42 56.6 79,889 166 65.1 99,485 182 75.1 

3 MIS 7,313 17 19.9 73,538 155 59.9 88,546 170 66.8 

4 DBRS 330 1 0.9 3,424 8 2.8 10,077 18 7.6 

5 KBRA 0 0 0.0 5,678 13 4.6 0 0 0.0 

Total 
Rated 36,805 84 122,716 260 132,547 249 
Market 

* Chart 14 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Asset-Backed Alert website, available at 

https://www.abalert.com/. The Staff has adjusted the presentation of the information by aggregating individual 

pre-integration DBRS and MCR information to present the information consistently as a combined entity, DBRS. 

See note 70. 

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2. Other Asset-Backed Securities Market 

Share Observations74 

As illustrated above, some of the smaller NRSROs 
have gained market share in the asset-backed 
securities rating category. In particular, the smaller 
NRSROs have gained market share rating asset-
backed securities backed by discrete asset types, 
especially newer or esoteric assets. 

For instance, smaller NRSROs are significant 
raters of securities backed by unsecured consumer 
loans, including consumer loans originated through 
marketplace lending platforms. KBRA and DBRS 
had the two highest market shares in this category 
during the Report Period, both rating approxi-
mately 57.8% of the transactions priced during 
such period.75 

Another example of market share gains achieved 
by smaller NRSROs in discrete asset classes 
is KBRA’s rating of securitizations backed by 
aircraft-lease receivables. KBRA rated each of the 
fifteen aircraft-lease receivables transactions (with 
an aggregate principal amount of $7.6 billion) 
that priced during the Report Period.76 KBRA has 
rated each aircraft-lease receivables transaction 
(fifty-seven in total) issued from December 2015 
through the end of the Report Period.77 

KBRA was also active rating whole-business securi-
tizations during the Report Period, rating 88.2% of 
the issuance amount of such transactions.78 KBRA’s 
market share in the whole-business category is 
further demonstrated when measured by the 
number of transactions rather than dollar amounts 
of issuance; KBRA rated nine of the eleven transac-
tions priced during the Report Period.79 

Smaller NRSROs have also been able to gain 
market share in rating more traditional types of 
asset-backed securities. During the Report Period, 
DBRS rated more traditional types of asset-
backed securities (aside from the MBS and CMBS 
categories) than the other smaller NRSROs. For 
example, DBRS rated 64.9% of the transactions 
backed by student loans that priced during the 
Report Period.80 DBRS also rated a sizable minority 
of one of the larger asset-backed securities asset 
classes—i.e., credit card transactions.81 DBRS rated 
23.6% of the credit card asset-backed securities 
priced during the Report Period.82 

DBRS has also been able to gain market share in 
auto-related asset-backed securities. During the 
Report Period, DBRS rated 40.9% of the auto-fleet 
lease transactions, 30.3% of the subprime auto loan 
transactions, 13.7% of the prime auto loan trans-

74 Unless noted otherwise, all market share percentages in this Section IV.B.2 are based on dollar amounts of issuance. The 
information in this Section IV.B.2 is from the Asset-Backed Alert database as of July 10, 2020. For purposes of this section, 
the information for pre-integration DBRS and MCR were aggregated to reflect their current operations as the combined 
entity, DBRS. See supra text accompanying note 70. 

75 See Asset-Backed Alert database. The Asset-Backed Alert database indicates that fifty-two unsecured consumer loan 
transactions totaling $17.1 billion priced during the Report Period. 

76 See id. 
77 See id. 
78 See id. The Asset-Backed Alert database indicates that eleven whole-business securitization transactions totaling $6.0 

billion priced during the Report Period. DBRS also rated two whole-business securitization transactions representing 9.4% 
of the transactions during the Report Period. 

79 See id. 
80 See id. The Asset-Backed Alert database indicates that forty student loan transactions totaling $17.2 billion priced during 

the Report Period. 
81 The Asset-Backed Alert database lists thirty-six credit card transactions totaling $19.4 billion that priced during the Report 

Period. 
82 See Asset-Backed Alert database. 

22 |  O F F I C E  O F  C R E D I T  R A T I N G S  

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actions, and 3.2% of the auto lease transactions that 
priced during the Report Period.83 KBRA has also 
established a market share presence in some of these 
auto-related asset-backed security categories, rating 
32.8% of the subprime auto loan transactions and 
1.0% of the prime auto loan transactions during the 
Report Period.84 

Smaller NRSROs have also achieved notable market 
share in certain types of residential mortgage-
backed securities not included in Chart 13. DBRS 
rated all but two of the transactions backed by 
non-performing or re-performing mortgages that 
priced in the Report Period.85 Additionally, DBRS 
and KBRA were active rating securities backed by 
subprime mortgages and risk transfer securities 
during the Report Period. For securities backed 
by subprime mortgages, DBRS rated 54.9% and 
KBRA rated 38.2%.86 For risk transfer securities, 
DBRS rated 51.4% and KBRA rated 31.8%.87 

C. BARRIERS TO ENTRY 
Barriers to entry continue to exist in the credit 
ratings industry, presenting competitive challenges 
for the smaller NRSROs. 

One such potential barrier that has been raised 
by certain smaller NRSROs are the investment 
management contracts of some institutional fund 
managers and the investment guidelines of some 
fixed income mutual fund managers, pension 
plan sponsors, and endowment fund managers, 
which require the use of ratings of specified rating 
agencies.88 The effect of these requirements can be 
to increase the demand for and liquidity of securities 
bearing the ratings of specified rating agencies. 
Historically, many of these guidelines refer to the 
ratings from the larger NRSROs by name (i.e., Fitch, 
MIS, and S&P). Despite reports in recent years that 
investors are increasingly changing their guidelines to 
allow for investments in securities rated by a wider 
group of NRSROs,89 investment guidelines continue 
to be identified as a factor impacting the selection of 
NRSROs to rate certain transactions.90 

A related barrier to entry is the inclusion require-
ments of some fixed income indices. To be included 
in certain of these indices, securities must be rated by 
specified NRSROs. Certain investment companies 
try to closely track the performance of the indices by 
purchasing the securities included in them, and can 

83 See id. For the Report Period, the Asset-Backed Alert database lists nine auto-fleet lease transactions totaling $6.1 billion, 
fifty-five subprime auto loan transactions totaling $26.7 billion, 108 prime auto loan transactions totaling $95.7 billion, 
and thirty-eight auto lease transactions totaling $30.0 billion. 

84 See id. 
85 See id. The Asset-Backed Alert database indicates that twenty-six non-performing or re-performing mortgage backed 

securities transactions totaling $16.5 billion priced during the Report Period 
86 See id. The Asset-Backed Alert database indicates that fifty-seven subprime mortgage-backed securities transactions totaling 

$20.9 billion priced during the Report Period. 
87 See id. The Asset-Backed Alert database indicates that twenty-eight risk transfer transactions totaling $23.6 billion priced 

during the Report Period. 
88 See Letter from KBRA to the Commission (Aug. 19, 2014), available at https://www.sec.gov/comments/s7-18-11/ 

s71811-88.pdf. This barrier to entry was also mentioned during the SEC’s Credit Ratings Roundtable held on May 
14, 2013. At the roundtable, a representative of MCR mentioned that, according to a study conducted by MCR, 
approximately 42% of open-end fixed income funds with investment guidelines that reference ratings specifically refer 
to S&P, MIS, or a “major NRSRO.” See Credit Rating Roundtable, May 14, 2013, available at https://www.sec.gov/ 
spotlight/credit-ratings-roundtable.shtml. 

89 See, e.g., Big Investors Accept More Rating Agencies, Asset-Backed Alert, May 19, 2017. 
90 See S&P Vaults Past Moody’s in Conduit Sector, Commercial Mortgage Alert, Jan. 24, 2020; S&P, Moody’s Duke It Out in 

Fitch’s Shadow, Commercial Mortgage Alert, Jan. 25, 2019. 

A N N U A L  R E P O R T  |  23 

https://www.sec.gov/comments/s7-18-11/s71811-88.pdf
https://www.sec.gov/comments/s7-18-11/s71811-88.pdf
https://www.sec.gov/spotlight/credit-ratings-roundtable.shtml
https://www.sec.gov/spotlight/credit-ratings-roundtable.shtml
https://transactions.90
https://agencies.88
https://31.8%.87
https://38.2%.86
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thus increase the demand for securities bearing the 
ratings of particular NRSROs.91 For instance, Fitch 
announced that its ratings had been added to the 
J.P. Morgan High-Yield Bond Indices, noting that 
investors rely on such indices to determine which 
bonds suit their level of credit risk.92 

Market participants and academics have identified 
various other barriers to entry in the credit rating 
industry, including economic and regulatory 
barriers.93 Among the regulatory barriers to entry for 
NRSROs are the costs associated with complying 
with the statutory provisions implemented by the 
Rating Agency Act and the Dodd-Frank Act and the 
related rules adopted by the Commission, including 
the rules and rule amendments that the Commission 
adopted pursuant to the Dodd-Frank Act (the 
“NRSRO Amendments”).94 Commenters on the 
proposed NRSRO Amendments expressed 

concerns that certain of the requirements would 
be burdensome for smaller NRSROs to implement 
and could raise barriers to entry for credit rating 
agencies to seek to register as NRSROs.95 In 
connection with the NRSRO Amendments, the 
Commission acknowledged that, despite efforts 
to limit the impact on small entities, the Dodd-
Frank Act contained requirements, including those 
implemented by the NRSRO Amendments, which 
impose costs on NRSROs and may consequently 
create barriers to entry and have negative impacts on 
competition.96 The NRSRO Amendments as adopted 
by the Commission include various changes intended 
to address concerns regarding barriers to entry, 
including standards allowing NRSROs to tailor 
particular requirements to their business models, 
size, and rating methodologies.97 

91 See, e.g., Rating Firms Seek Changes to Index, Asset-Backed Alert, May 26, 2017. 
92 See Fitch Ratings Joins J.P. Morgan High Yield Bond Indices, Fitch Ratings, June 28, 2017. In a related example, 

DBRS announced that its ratings would be included in the determination of index credit quality classifications for 
CAD-denominated securities in the Bloomberg Barclays Canada Aggregate Index and the Global Aggregate Index, 
resulting in approximately 49 securities being added to the Canadian Aggregate Index. See DBRS Bond Ratings to Be 
Included in the Bloomberg Barclays Canada Aggregate Index, DBRS, Inc., Apr. 19, 2018. 

93 See, e.g., Section IV.C of the March 2012 Annual Report, available at https://www.sec.gov/divisions/marketreg/ 
ratingagency/nrsroannrep0312.pdf; Fitch Assigns ‘A-’ Rating to S&P’s Senior Unsecured Notes Offering, Outlook Stable, 
Fitch Ratings, Aug. 10, 2020; Fitch Assigns ‘BBB+’ Rating to Moody’s Senior Unsecured Notes Offering, Outlook Stable, 
Fitch Ratings, Aug. 4, 2020. 

94 See 2014 Adopting Release, 79 FR 55077 (Sept. 15, 2014), available at https://www.govinfo.gov/content/pkg/FR-2014-
09-15/pdf/2014-20890.pdf. 

95 See 2014 Adopting Release, 79 FR at 55090, 55154, 55161, and 55254-55. See also comment letters received with respect 
to the NRSRO Amendments as proposed, available at https://www.sec.gov/comments/s7-18-11/s71811.shtml. 

96 See 2014 Adopting Release, 79 FR at 55254. 
97 See Section IV.C of the December 2015 Annual Report, available at https://www.sec.gov/ocr/reportspubs/annual-

reports/2015-annual-report-on-nrsros.pdf. 

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https://www.sec.gov/divisions/marketreg/ratingagency/nrsroannrep0312.pdf
https://www.sec.gov/divisions/marketreg/ratingagency/nrsroannrep0312.pdf
https://www.sec.gov/comments/s7-18-11/s71811.shtml
https://www.sec.gov/ocr/reportspubs/annual-reports/2015-annual-report-on-nrsros.pdf
https://www.sec.gov/ocr/reportspubs/annual-reports/2015-annual-report-on-nrsros.pdf
https://www.govinfo.gov/content/pkg/FR-2014
https://methodologies.97
https://competition.96
https://NRSROs.95
https://Amendments�).94
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V. Transparency 

C
ongress described the Rating Agency Act 
as an Act to improve ratings quality for 
the protection of investors and in the 
public interest “by fostering accountability, 

transparency, and competition in the credit rating 
agency industry.”98 Section 932 of the Dodd-Frank 
Act is entitled “Enhanced regulation, accountability, 
and transparency of NRSROs.” Both Acts contain 
various provisions designed to increase the trans-
parency—through clear disclosure open to public 
scrutiny—of, among other things, NRSROs’ credit 
rating procedures and methodologies, business 
practices, and credit ratings performance. Under 
Exchange Act rules, NRSROs are required to 
disclose: 

§	standardized performance statistics;99 

§	consolidated information about credit rating 
histories;100 

§	information about material changes and 
significant errors in the procedures and 
methodologies used to determine credit ratings;101 

§	information about specific rating actions;102 and 
§	clear definitions of each symbol, number, or score 

in the rating scale used by the NRSRO.103 

98 See the preamble to the Rating Agency Act. 
99 See Instructions for Exhibit 1 to Form NRSRO. 
100 See Rule 17g-7(b). 
101 See Rule 17g-8(a)(4). 
102 See Rule 17g-7(a). 
103 See Rule 17g-8(b)(2). 
104 See Rule 17g-7(a). 
105 See Rule 17g-7(a)(1)(ii). 

NRSROs must also disclose certain information in 
connection with each rating action.104 Such infor-
mation includes, among other things, the version of 
the procedure or methodology used to determine 
the credit rating, a description of the types of data 
that were relied upon for purposes of determining 
the credit rating, an assessment of the quality of 
information available and considered in determining 
the credit rating, and information on the sensitivity 
of the credit ratings to assumptions made by the 
NRSRO.105 

In addition to or in connection with required 
disclosures, NRSROs often issue press releases and 
reports at the time of a rating action to describe 
the rationale behind such rating action, and make 
versions of methodologies for determining credit 
ratings available on their websites.106 The avail-
ability of underlying methodologies, together with a 
report discussing the analysis supporting the rating 
action, may provide additional transparency into an 
NRSRO’s credit analysis and credit rating process. 

106 The reports accompanying a rating action are frequently available on a paid subscription basis, although some NRSROs 
provide access to such reports for free. 

A N N U A L  R E P O R T  |  25 



  

 
 

 
 

 
 
 
 

 

 
 

  
 

 

 
 

 
 

 

 

From time-to-time, NRSROs also publish revisions 
and updates to their methodologies. They may also 
at times publish revisions to the assumptions that are 
inputs to their methodologies and rating approaches, 
including changes to their economic outlooks or 
default rate assumptions. Revised methodologies 
and related assumptions may provide additional 
transparency into changes in the NRSROs’ credit 
views and analyses. 

NRSROs may also provide transparency to the 
extent they publish commentaries or research. 
NRSROs publish commentaries and research that 
generally include data, analyses, or projections on 
market sectors and economic outlooks.107 These 
publications may be helpful to investors to under-
stand industry trends and the NRSROs’ credit views. 
For example, following the emergence of COVID-19 
in early 2020, NRSROs began publishing commen-
taries and research that provide their perspectives on 
the potential credit and rating impacts of COVID-19 
on issuers and debt obligations in different market 
sectors. They also began publishing COVID-19-re-
lated commentaries on economic and market trends. 

107 NRSROs may also make market and economic data separately available. 

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 VI. Conficts of Interest 

N
RSROs operate under one or more business 
models, each having potential conflicts of 
interest. Most of the NRSROs primarily 
operate under the “issuer-pay” model, 

which is subject to a potential conflict in that the 
credit rating agency may be influenced to determine 
more favorable (i.e., higher) ratings than warranted 
to retain the obligors or issuers as clients. Certain 
NRSROs may also operate under the “subscriber-
pay” model, which means that investors pay a 
subscription fee to access an NRSRO’s ratings. 
This model is also subject to potential conflicts of 
interests. For example, an NRSRO may be aware 
that an influential subscriber holds a securities 
position (long or short) that could be advantaged 
if a credit rating upgrade or downgrade causes the 
market value of the security to increase or decrease 
or that a subscriber invests in newly issued bonds 
and would obtain higher yields if the bonds were to 
have lower ratings. 

Section 15E and the related Commission rules 
address conflicts of interest.108  For example, Rule 
17g-5 identifies certain conflicts of interest that 
are prohibited under all circumstances109 and other 
conflicts of interest that are prohibited unless an 
NRSRO has publicly disclosed the existence of the 
conflict and has implemented policies and proce-
dures reasonably designed to address and manage 
such conflict.110 

Among the conflicts of interest identified in Rule 
17g-5 are conflicts involving individual credit 
analysts or other employees of an NRSRO. For 
example, an NRSRO is prohibited from issuing or 
maintaining a credit rating for a person where an 
employee of the NRSRO that participated in deter-
mining, or is responsible for approving, the credit 
rating directly owns securities of, or is an officer or 
director of, the person that would be subject to the 
credit rating.111 

Rule 17g-5(c)(8) is another example of a prohibited 
conflict of interest involving persons within an 
NRSRO. Under the Rule, an NRSRO is prohibited 
from issuing or maintaining a credit rating where 
a person within the NRSRO who participates in 
determining or monitoring the rating, or developing 
or approving procedures or methodologies used for 
determining the rating, also (a) participates in sales 
or marketing activities of the NRSRO or its affiliate, 
or (b) is influenced by sales or marketing consider-
ations.112 

Other statutory provisions and Commission rules 
address potential conflicts of interest that may arise 
when a credit analyst seeks employment outside 
the NRSRO. Section 15E requires each NRSRO 
to have policies and procedures in place to provide 
for an internal “look-back” review process in order 
to determine whether any conflict of interest of a 
former employee influenced a credit rating in certain 

108 See, e.g., Section 15E(h); Rule 17g-5. 
109 See Rule 17g-5(c). 
110 See Rule 17g-5(a)(1)-(2); Rule 17g-5(b); Instructions for Exhibits 6 and 7 to Form NRSRO. In addition, Section 15E(t)(3) 

(B) requires an NRSRO’s board of directors to oversee the establishment, maintenance, and enforcement of policies and 
procedures to address, manage, and disclose any conflicts of interest. 

111 See Rule 17g-5(c)(2); Rule 17g-5(c)(4). 
112 See Rule 17g-5(c)(8). 

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instances.113  Rule 17g-8(c) requires an NRSRO’s 
policies and procedures to address instances in which 
a “look-back” review determined that a conflict of 
interest influenced a credit rating. Such policies and 
procedures are required to be reasonably designed 
to ensure that the NRSRO will promptly determine 
whether a credit rating must be revised and promptly 
publish a revised credit rating or an affirmation of 
the credit rating, along with certain disclosures about 
the existence of the conflict.114 

One of the conflict of interest rules concerns the 
issuer-pay conflict of interest relating to structured 
finance products. The Commission adopted Rule 
17g-5(a)(3) in 2009 to address this conflict of 
interest. Since the June 2, 2010 compliance date of 
Rule 17g-5(a)(3), an exemption has been in effect 
with regard to structured finance products issued by 
non-U.S. issuers in transactions outside the United 
States. As described in the final bullet point under 

Section III.B above, the Commission codified the 
exemption in August 2019. In the adopting release, 
the Commission directed the Staff to further evaluate 
the effectiveness of Rule 17g-5(a)(3) with respect to 
ratings of structured finance products that are not 
eligible for relief under the adopted exemption.115 

Towards this end, in a February 2020 speech, former 
Director Kane welcomed input and engagement 
from all interested parties on the effectiveness of 
Rule 17g-5(a)(3).116 

The annual examinations conducted by Staff 
in accordance with Section 15E(p) are required 
to include, among other things, a review of 
the management of conflicts of interest by the 
NRSROs.117  Information regarding the examina-
tions, including any essential findings with respect 
to the required review areas, is included in OCR’s 
annual examination reports.118 

VII. Conclusion 

The Staff will continue to conduct its oversight other activities in furtherance of OCR’s regulatory 
function with respect to NRSROs, including the mission, as described in this Report. 
performance of Staff examinations, and engage in 

113 See Section 15E(h)(4)(A). 
114 See Rule 17g-8(c). 
115 See 2019 Adopting Release, 84 FR 40247, 40250 (Aug. 14, 2019), available at https://www.govinfo.gov/content/pkg/ 

FR-2019-08-14/pdf/2019-17218.pdf. 
116 See OCR Former Director Jessica Kane, Speech, supra note 35. Further details about this speech can be found in the sixth 

bullet point under Section III.B above. 
117 See Section 15E(p)(3)(B)(ii). 
118 The examination reports can be found under “Summary Examination Reports” in the “Reports and Studies” section of the 

OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html. 

28 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://www.sec.gov/ocr/ocr-reports-and-studies.html


A N N U A L  R E P O R T  |     29 



U . S .  S E C U R I T I E S  A N D  E X C H A N G E  C O M M I S S I O N  

Washington, DC

A N N U A L  R E P O R T  |   i   

 
  
  

 

O F F I C E  O F  C R E D I T  R A T I N G S  

Annual 
Report 

ON 

NATIONALLY 
RECOGNIZED 

STATISTICAL RATING 
ORGANIZATIONS 

As Required by Section 6 of the Credit 
Rating Agency Reform Act of 2006 

December 2020 

U  . S .  S E C U R I T I E S  A N D  E X  C H A N G E  C  O M M I S  S I O N  



|   O F F I C E  O F  C R E D I T  R A T I N G S    

THIS IS A REPORT OF THE STAFF OF THE U.S. SECURITIES AND EXCHANGE COMMISSION. 
THE COMMISSION HAS EXPRESSED NO VIEW REGARDING THE ANALYSIS, FINDINGS, OR CONCLUSIONS CONTAINED HEREIN. ii 



A N N U A L  R E P O R T |   i  

  

   

   

    

    

   

    

                               

                                

                                          

   

   

    

     

   

                                            

  

 

  

Table of Contents

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. STATUS OF REGISTRANTS AND APPLICANTS . . . . . . . . . . . . . . . . . . . . . . . . . 2

III. ACTIVITIES RELATING TO NRSROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

B. Commission Orders and Releases and Staff Publications . . . . . . . . . . . . . . . . . 6

IV. COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. Select NRSRO Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 

1. NRSRO Credit Ratings Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. NRSRO Analytical Staffng Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

3. NRSRO Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

B. Recent Developments in the State of Competition Among NRSROs . . . . . . . . . .16

1. Market Share Observations in the Asset-Backed Securities Rating Category . . . .16

(a) CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

(b) ABS/MBS/CLO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2. Other Asset-Backed Securities Market Share Observations . . . . . . . . . . . . . 22

C. Barriers to Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

V. TRANSPARENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

VI. CONFLICTS OF INTEREST.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  27

VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28



  

   

    

                                       

     

  

                                      

         

     

 

  

     

 

     

                         

     

                         

     

                         

     

                         

     

  

     

                         

     

 

ii |   O F F I C E  O F  C R E D I T  R A T I N G S

Table of Charts

Chart 1. List of NRSROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Chart 2. Number of Outstanding Credit Ratings as of December 31, 2019

by Rating Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chart 3. Percentage by Rating Category of Each NRSRO’s Outstanding

Credit Ratings of the Total Outstanding Credit Ratings of all NRSROs as

of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chart 4. Breakdown of Ratings Reported Outstanding as of December 31, 2019 . . . . . . .12

Chart 5. Breakdown of Non-Government Securities Ratings Reported

Outstanding as of December 31, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Chart 6. NRSRO Credit Analysts and Credit Analyst Supervisors. . . . . . . . . . . . . . . . .13

Chart 7. NRSRO Revenue Information: Fiscal Year Percentage of Total

Reported NRSRO Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Chart 8. Rating Agency Market Share for Total Non-Agency U.S. CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .18

Chart 9. Rating Agency Market Share for U.S. Conduit CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .18

Chart 10. Rating Agency Market Share for U.S. Single-Borrower CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .19

Chart 11. Rating Agency Market Share for Agency CMBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .19

Chart 12. Rating Agency Market Shares for U.S. ABS Issued in

2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chart 13. Rating Agency Market Shares for U.S. MBS

Issued in 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . . . . . . . . .21

Chart 14. Rating Agency Market Shares for U.S. CLO

Issued in First Half of 2018, 2019, and First Half of 2020 . . . . . . . . . . . . . . . . .21



  

I. Introduction 

T
he staff (the “Staff”) of the U.S. Securities 
and Exchange Commission (the 
“Commission” or “SEC”) is providing 
this report (“Report”) regarding nationally 

recognized statistical rating organizations 
(“NRSROs”) pursuant to Section 6 of the Credit 
Rating Agency Reform Act of 2006 (“Rating Agency 
Act”).1 This Report reflects solely the Staff’s views. 
Section 6 of the Rating Agency Act requires the 
Commission to submit an annual report (“Annual 
Report”) to the Committee on Banking, Housing, 
and Urban Affairs of the U.S. Senate and the 
Committee on Financial Services of the U.S. House 
of Representatives (“Congressional Committees”) 
that, with respect to the year to which the Annual 
Report relates:

§	identifies applicants for registration as NRSROs 
under Section 15E of the Securities Exchange Act 
of 1934, as amended (the “Exchange Act”);2

§	specifies the number of, and actions taken on, 
such applications; and

§	specifies the views of the Commission on the state 
of competition, transparency, and conflicts of 
interest among NRSROs.

1	 Pub. L. No. 109-291, 120 Stat. 1327 (Sept. 29, 2006). The Rating Agency Act, among other things, added Section 15E 
to the Securities Exchange Act of 1934 to establish self-executing requirements on NRSROs and provide the Commission 
with the authority to implement a registration and oversight program for NRSROs. In June 2007, the Commission 
approved rules implementing such a program. See Oversight of Credit Rating Agencies Registered as Nationally 
Recognized Statistical Rating Organizations, Release No. 34-55857 (June 5, 2007), 72 FR 33564 (June 18, 2007), 
available at https://www.sec.gov/rules/final/2007/34-55857fr.pdf.

2	 Unless otherwise noted, all references to specific statutory sections and rules in this Report are to sections in the Exchange 
Act and related rules.

3	 Note, however, that Section III.B of this Report includes information regarding Commission Orders and Releases and Staff 
Publications from June 26, 2019 through November 30, 2020.

4	 Prior Annual Reports can be found under “Annual Reports to Congress” in the “Reports and Studies” section of the OCR 
webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html.

This Report generally focuses on the period from 
June 26, 2019 to June 25, 2020 (the “Report 
Period”).3 In addition to addressing the items 
specified in Section 6 of the Rating Agency Act, this 
Report provides an overview of certain Commission 
and Staff activities relating to NRSROs. 

Information regarding the topics covered in this 
Report with respect to prior periods can be found 
on the Office of Credit Ratings (“OCR”) page of the 
Commission’s website.4

A N N U A L  R E P O R T  |  1 

https://www.sec.gov/rules/final/2007/34-55857fr.pdf
https://www.sec.gov/ocr/ocr-reports-and-studies.html


  

 
 

 
 

 

  
  
  
   

  
 
 

  
 

  
 
 
 

 

   
 

 
   

 

 
  

 
 

 
 

  
 

  

 

 

 

II. Status of Registrants 
and Applicants 

S
ection 3(a)(62) defines a “nationally recog-
nized statistical rating organization” as a 
credit rating agency that is registered under 
Section 15E and issues credit ratings certified 

by qualified institutional buyers, in accordance with 
Section 15E(a)(1)(B)(ix), with respect to: 

i. financial institutions, brokers, or dealers; 
ii. insurance companies; 
iii. corporate issuers; 
iv. issuers of asset-backed securities (as that term 

is defined in 17 CFR 229.1101(c)); 

v. issuers of government securities, municipal 
securities, or securities issued by a foreign 
government; or 

vi. a combination of one or more categories of 
obligors described in any of clauses (i) through 
(v) above. 

As of November 30, 2020, there are nine credit 
rating agencies registered as NRSROs.5 Chart 1 
below lists each NRSRO registered with the 
Commission, categories of credit ratings described 
in clauses (i) through (v) of Section 3(a)(62)(A) in 
which each NRSRO is registered, and location of 
each NRSRO’s principal office.6 

Chart 1: List of NRSROs 

NRSRO Categories of Credit Ratings Principal Offce 

A.M. Best Rating Services, Inc. (“AMB”) (ii), (iii), and (iv) U.S. 

DBRS, Inc. (“DBRS”) (i) through (v) U.S. 

Egan-Jones Ratings Company (“EJR”) (i) through (iii) U.S. 

Fitch Ratings, Inc. (“Fitch”) (i) through (v) U.S. 

HR Ratings de México, S.A. de C.V. (“HR”) (i), (iii), and (v) Mexico 

Japan Credit Rating Agency, Ltd. (“JCR”) (i), (ii), (iii), and (v) Japan 

Kroll Bond Rating Agency, Inc. (“KBRA”) (i) through (v) U.S. 

Moody’s Investors Service, Inc. (“MIS”) (i) through (v) U.S. 

S&P Global Ratings (“S&P”) (i) through (v) U.S. 

5 Section 15E(a) sets out registration procedures for a credit rating agency to voluntarily apply to be registered with the 
Commission as an NRSRO. 

6 See the current Form NRSRO on each NRSRO’s website for any updates to this information. Each NRSRO must file with 
the Commission on EDGAR a Form NRSRO for annual certification and registration updates pursuant to Rule 17g-1(e) 
and (1)(f), and each NRSRO must make its current Form NRSRO publicly and freely available on its website pursuant to 
Rule 17g-1(i). Links to each NRSRO’s website can be found under the “Current NRSROs” section of the OCR webpage, 
available at https://www.sec.gov/ocr/ocr-current-nrsros.html. 

2 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/ocr/ocr-current-nrsros.html


  

 
 
 
 
 
 
 

 
 

 
 
 

 
 

 
 

 

 
 

 

 

 
 

 
 

 
 
 

 
 

 
 

 
 

  

 
 

 

On July 2, 2019, Morningstar, Inc., the parent 
of Morningstar Credit Ratings, LLC (“MCR”), 
completed an acquisition of DBRS and the two 
NRSROs began integrating their operations. On 
November 15, 2019, MCR furnished a notice of 
withdrawal from registration to the Commission 
(which became effective on December 30, 2019), 
and DBRS filed an update to Form NRSRO to add 
MCR as a credit rating affiliate. On November 
23, 2020, DBRS filed an update to Form NRSRO 
to remove MCR as a credit rating affiliate. For 
purposes of this Report: (1) activities of DBRS, 
Inc. prior to July 2, 2019 are attributed to 
“pre-integration DBRS;” (2) activities of MCR prior 
to July 2, 2019 are attributed to “MCR;” and (3) 
activities of the two NRSROs from July 2, 2019 
onward are attributed to “DBRS.” 

For purposes of this Report only, we refer to Fitch, 
MIS, and S&P as “larger NRSROs” and the other 
NRSROs (AMB, DBRS, EJR, HR, JCR, and KBRA) 
as “smaller NRSROs.” 

Applications for initial registration and for regis-
tration by current NRSROs in additional rating 
categories are filed on Form NRSRO.7 In addition, 
Section 15E(b) requires NRSROs to promptly 
amend Form NRSRO if any information or 
document provided therein becomes materially 
inaccurate. This section also requires NRSROs to 
annually amend Form NRSRO to update ratings 
count and performance information, certify the 
continuing accuracy of the information and 
documents provided therein, and list any material 
change thereto during the previous calendar year. 
OCR Staff review such amendments to Forms 
NRSRO in light of the requirements of Section 
15E(b), Rule 17g-1, and the Instructions to 
Form NRSRO. 

No applications for initial registration as an NRSRO 
or for registration by a current NRSRO in additional 
rating categories were filed with the Commission 
during the Report Period. 

7 See Section 15E(a) and Rule 17g-1; see also Form NRSRO, available at https://www.sec.gov/about/forms/formnrsro.pdf. 

A N N U A L  R E P O R T  |  3 

https://www.sec.gov/about/forms/formnrsro.pdf


  

 
 

 
 
 
 

 
 

 
 
 

 

 
 

 
 

 
 

 

 
 
 
  

 
 

  
 

 
 

 
 

 
 

 
 

 
 

 
 
 

 
 

 
  

 

  
 

III. Activities Relating 
to NRSROs 

A. ACTIVITIES 

T
he Dodd-Frank Wall Street Reform and 
Consumer Protection Act (“Dodd-Frank 
Act”)8 mandated the creation of OCR. OCR 
is responsible for the oversight of credit 

rating agencies registered with the Commission 
as NRSROs. OCR’s Staff includes professionals 
with expertise in a variety of areas that relate to its 
regulatory mission, such as corporate, municipal, 
and structured debt finance.9 

OCR’s responsibilities—as mandated by the Dodd-
Frank Act—include, among other things, conducting 
an examination of each NRSRO at least annually in 
eight specified review areas.10 Information regarding 
the examinations is included in OCR’s annual 
examination reports.11 

OCR also monitors trends and developments 
affecting the credit rating industry. For example, 
OCR Staff may meet with NRSROs to discuss rating 
and industry developments and with the boards of 
directors of NRSROs to discuss, among other things, 
compliance and oversight matters. OCR Staff also 

may meet with a variety of other market partici-
pants, including investors, issuers, regulators, and 
industry organizations, to discuss matters relevant to 
the credit rating industry. 

During the Report Period, OCR Staff continued 
to participate in meetings that involved rating 
agency regulators globally, including those of the 
supervisory colleges that were formed for the 
largest internationally active credit rating agencies. 
The supervisory colleges were formed to enhance 
communication among credit rating agency 
regulators globally with respect to examinations 
of the relevant credit rating agencies.12 During 
the Report Period, each college held an in-person 
meeting and conducted quarterly calls. OCR Staff 
also conducted additional discussions with interna-
tional regulators, as appropriate. 

In 2019, the Fixed Income Market Structure 
Advisory Committee (“FIMSAC”)13 established a 
Credit Ratings Subcommittee to consider the role of 
credit ratings issued by NRSROs in the corporate 

8 See Pub. L. No. 111-203, 124 Stat. 1376 (2010). 
9 See Section 15E(p)(2) for a description of OCR staffing requirements. 
10 See Section 15E(p)(3). 
11 The examination reports can be found under “Summary Examination Reports” in the “Reports and Studies” section of the 

OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html. 
12 See IOSCO, Supervisory Colleges for Credit Rating Agencies, Final Report (July 2013), available at https://www.iosco. 

org/library/pubdocs/pdf/IOSCOPD416.pdf. The SEC serves as chair of the colleges for S&P and MIS, and OCR Staff 
represents the SEC in this regard. The European Securities and Markets Authority serves as chair of the college for Fitch. 

13 FIMSAC was formed in November 2017 to provide the Commission with diverse perspectives on the structure and 
operations of the U.S. fixed income markets, as well as advice and recommendations on matters related to fixed income 
market structure. The FIMSAC’s current charter is available at https://www.sec.gov/spotlight/fixed-income-advisory-
committee/fimsac-charter-nov-2019.pdf. 

4 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/ocr/ocr-reports-and-studies.html
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD416.pdf.
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD416.pdf.
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-charter-nov-2019.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-charter-nov-2019.pdf
https://agencies.12
https://reports.11
https://areas.10


  

 

 
 

 
 
 

 
 

 

 
 

  
 

 

 

 
 

 

 
 

 
  

  
 

 

 
 

 

 

 
 

 
 

 

 
 

 
 

  
 
 

 
 

 
 
 

 
 

 
 

bond and municipal securities markets.14 During 
the Report Period, the Credit Ratings Subcom-
mittee made several presentations regarding 
NRSRO competition and compensation models 
at the FIMSAC’s quarterly meetings.15 At the 
FIMSAC meeting on June 1, 2020,16 the FIMSAC 
approved, for the Commission’s consideration, the 
Credit Ratings Subcommittee’s recommendation 
for mitigating potential conflicts of interest in 
credit ratings.17 

In addition, the SEC’s Investor Advisory Committee 
(“IAC”)18 met on July 25, 2019 to discuss the SEC’s 

approach to regulation in areas with limited 
competition, including the credit rating agency 
industry.19 The IAC met on September 19, 2019 
to discuss increased leverage and related SEC 
regulatory implications, including the role of 
NRSROs in the leveraged loan and CLO markets.20 

At the IAC meeting on November 7, 2019,21 SEC 
Chairman Jay Clayton suggested future topics of 
focus for the committee, including questions related 
to credit rating agencies.22 At the IAC meeting on 
May 21, 2020,23 Chairman Clayton suggested 
additional topics of focus for the committee related 
to credit rating agencies.24 

14 Topics that may be considered by the Credit Ratings Subcommittee include, but are not limited to, (1) the use of credit 
ratings by various market participants and the implications of ratings changes for these market participants, (2) the costs 
and benefits of the current model for credit rating issuance, (3) the U.S. regulatory regime for credit rating agencies registered 
as NRSROs, and (4) issuances of unsolicited credit ratings and the publication of commentaries. See https://www.sec.gov/ 
spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm. 

15 See Transcript of FIMSAC Meeting, SEC (July 29, 2019), available at https://www.sec.gov/spotlight/fixed-income-advisory-
committee/fimsac-072919transcript.txt; Transcript of FIMSAC Meeting, SEC (Nov. 4, 2019), available at https://www.sec. 
gov/spotlight/fixed-income-advisory-committee/fimsac-110419transcript.txt; Transcript of FIMSAC Meeting, SEC (Feb. 
10, 2020), available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-transcript.pdf. The 
Credit Ratings Subcommittee circulated a discussion document ahead of the February 10, 2020 FIMSAC meeting, which 
is available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-document-
alternate-model-and-potential-initiatives.pdf. 

16 See Transcript of FIMSAC Meeting, SEC (June 1, 2020), available at https://www.sec.gov/spotlight/fixed-income-advisory-
committee/fimsac-060120-transcript.pdf. The Credit Ratings Subcommittee circulated its preliminary recommendation 
ahead of this FIMSAC meeting. See https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminary-
recommendations-credit-ratings-subcommittee.pdf. 

17 See FIMSAC Recommendation Regarding Ways to Mitigate Conflicts of Interest in Credit Ratings (June 1, 2020), available at 
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-recommendations-credit-ratings-subcommittee.pdf. 

18 Section 911 of the Dodd-Frank Act established the IAC to advise the Commission on regulatory priorities, the regulation 
of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor 
interests and to promote investor confidence and the integrity of the securities marketplace. The Dodd-Frank Act authorizes 
the IAC to submit findings and recommendations for review and consideration by the Commission. See https://www.sec.gov/ 
spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf. 

19 See Webcast of IAC Meeting, SEC (July 25, 2019), available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac072519. 

20 See Webcast of IAC Meeting, SEC (Sept. 19, 2019), available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac091919. 

21 See Webcast of IAC Meeting, SEC (Nov. 7, 2019) available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac110719. 

22 See Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (Nov. 7, 2019), available at https://www.sec. 
gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719 (noting interest in issues such as reliance 
by retail investors on credit rating agencies, whether credit rating agencies are appropriately disclosing, monitoring and 
managing their conflicts, whether investors are harmed by compensation models of credit rating agencies, and whether 
there are alternative payment models that would better align the interests of rating agencies with those of investors). 

23 See Webcast of IAC Meeting, SEC (May 21, 2020), available at https://www.sec.gov/video/webcast-archive-player. 
shtml?document_id=iac052120. 

24 See Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (May 21, 2020), available at https://www.sec. 
gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120 (noting, in addition to reliance 
by retail investors on credit rating agencies, interest in issues such as how much ratings influence today’s marketplace, 
including the potential risks and downstream effects of investment strategies and mandates that reference ratings (and 
consequently take action based on downgrades)). 

A N N U A L  R E P O R T  |  5 

https://www.sec.gov/spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-072919transcript.txt
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-072919transcript.txt
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-transcript.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-document-alternate-model-and-potential-initiatives.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-document-alternate-model-and-potential-initiatives.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-060120-transcript.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-060120-transcript.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminary-recommendations-credit-ratings-subcommittee.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminary-recommendations-credit-ratings-subcommittee.pdf
https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-recommendations-credit-ratings-subcommittee.pdf
https://www.sec.gov/spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf
https://www.sec.gov/spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac072519
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac072519
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac091919
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac091919
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac110719
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac110719
https://www.sec.gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719
https://www.sec.gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac052120
https://www.sec.gov/video/webcast-archive-player.shtml?document_id=iac052120
https://www.sec.gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120
https://www.sec.gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120
https://www.sec
https://agencies.24
https://agencies.22
https://markets.20
https://industry.19
https://ratings.17
https://meetings.15
https://markets.14


  

 
 
 

 
 

 
 
 

 
 

 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

  
 

  

 

 

 
 

 

  
  

 
 

 
 

 
 

 
 
 

 
 

 
 

 

 
 

 
 

 
 
 
 

  
 
 
 

In January 2020, Chairman Clayton asked 
Commission Staff to monitor and, to the extent 
necessary or appropriate, provide guidance and 
other assistance to issuers and other market partici-
pants regarding disclosures related to the current 
and potential effects of COVID-19.25 Following the 
Chairman’s January 2020 statement, Commission 
Staff expanded the ongoing outreach efforts with 
credit rating agencies, which included periodically 
communicating with the NRSROs to keep abreast of 
how they are considering the impacts of COVID-19 
on their credit ratings and operations.26 

On April 24, 2020, the Commission announced the 
formation of an internal, interdisciplinary COVID-19 
Market Monitoring Group, the membership of 
which includes the Director of OCR.27 This group 
was formed to assist the Commission and its various 
divisions and offices in (1) developing Commission 
and Staff analyses and actions related to the effects of 
COVID-19 on markets, issuers, and investors, and 
(2) responding to requests for information, analyses, 
and assistance from fellow regulators and other 
public sector partners on market matters arising from 
the effects of COVID-19.28 In addition to OCR’s 
continued participation in the COVID-19 Market 
Monitoring Group, OCR Staff continues to monitor 
the impact of COVID-19 on market matters related 
to the activities of the NRSROs. 

B. COMMISSION ORDERS AND 
RELEASES AND STAFF PUBLICATIONS 
The Commission and the Staff, as applicable, 
issued the following orders, releases, and 
publications relating to NRSROs or credit ratings 
in general from the start of the Report Period to 
November 30, 2020: 

§	Order Instituting Administrative and Cease-
and-Desist Proceedings Pursuant to Sections 
15E(d) and 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing 
Remedial Sanctions and a Cease-and-Desist 
Order, Release No. 34-90037 (Sept. 29, 2020).29 

The Commission instituted settled administrative 
proceedings against KBRA concerning violations 
of Rule 17g-8(b)(1) in connection with rating 
CLO Combo Notes. The SEC’s order finds 
that KBRA’s policies and procedures were not 
reasonably designed to ensure that it rated CLO 
Combo Notes in accordance with the terms of 
those securities. 

§	Order Instituting Administrative and Cease-
and-Desist Proceedings Pursuant to Sections 
15E(d) and 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing 
Remedial Sanctions and a Cease-and-Desist 
Order, Release No. 34-90036 (Sept. 29, 2020).30 

The Commission instituted settled administrative 
proceedings against KBRA concerning violations 
of Section 15E(c)(3)(A) in connection with rating 
CMBS. The SEC’s order finds that KBRA’s 

25 See Chairman Jay Clayton, Statement on Proposed Amendments to Modernize and Enhance Financial Disclosures; Other 
Ongoing Disclosure Modernization Initiatives; Impact of the Coronavirus; Environmental and Climate-Related Disclosure 
(Jan. 30, 2020), available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. 

26 See SEC Coronavirus (COVID-19) Response: Market Monitoring and Engagement with Market Participants, available at 
https://www.sec.gov/sec-coronavirus-covid-19-response. 

27 See SEC Forms Cross-Divisional COVID-19 Market Monitoring Group (Apr. 24, 2020), available at https://www.sec.gov/ 
news/press-release/2020-95. 

28 See SEC COVID-19 Market Monitoring Group – Update and Current Efforts (May 13, 2020), available at https://www. 
sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13. 

29 Available at https://www.sec.gov/litigation/admin/2020/34-90037.pdf. 
30 Available at https://www.sec.gov/litigation/admin/2020/34-90036.pdf. 

6 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30
https://www.sec.gov/sec-coronavirus-covid-19-response
https://www.sec.gov/news/press-release/2020-95
https://www.sec.gov/news/press-release/2020-95
https://www.sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13
https://www.sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13
https://www.sec.gov/litigation/admin/2020/34-90037.pdf
https://www.sec.gov/litigation/admin/2020/34-90036.pdf
https://2020).30
https://2020).29
https://COVID-19.28
https://operations.26
https://COVID-19.25


  

 
 

 
 
 

 
 

 
 

 
 

 
 

  
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
 

 
 

 

 
 
 
 

  

   

 
 

 
 

 
 

 
 

 
 

  

 
 

 
 

 
 

 
 

 
 

 
 

  
 
 
 
 
 
 
 
 
 
 

internal control structure failed to prevent or 
detect the ambiguity in KBRA’s record of its 
methodology for determining the CMBS ratings, 
such as a comparison of the methodology to the 
analysis used for specific transactions. 

§	Credit Ratings, Procyclicality and Related 
Financial Stability Issues: Select Observations 
(July 15, 2020).31 The Commission’s COVID-19 
Market Monitoring Group, which is discussed 
in Section III.A above, issued this statement 
describing the Group’s exploration of whether 
credit assessments and credit rating agency 
downgrades—and market anticipation of, and 
responses to, those ratings actions—may 
(1) contribute to negative procyclicality in certain 
circumstances, and (2) have implications for 
financial stability. 

§	Order Instituting Administrative and Cease-
and-Desist Proceedings Pursuant to Sections 
15E(d) and 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing 
Remedial Sanctions and a Cease-and-Desist 
Order, Release No. 34-88880 (May 15, 2020).32 

The Commission instituted settled administrative 
proceedings against MCR concerning violations 
of Rule 17g-5(c)(8)(i), which prohibits a rating 
agency from issuing or maintaining a credit rating 
where an analyst who participates in determining 
or monitoring credit ratings also participates in 
sales and marketing activity, and Section 15E(h) 
(1), which requires credit rating agencies to 
establish, maintain, and enforce policies and 
procedures reasonably designed to address and 
manage conflicts of interest. 

§	Staff No-Action Letter (Mar. 30, 2020).33 Due 
to COVID-19, EJR submitted a letter to staff 
related to its delay in filing its audited financial 
statements required by Rule 17g-3(a)(1).34 The 
Staff issued a no-action letter to EJR informing it 
that the Staff would not recommend enforcement 
action to the Commission if EJR did not file its 
audited financial statements by March 30, 2020 
as required by Rule 17g-3(a)(1), subject to the 
condition that such financial statements would 
be filed with the Commission no later than 
April 20, 2020. 

§	The SEC’s Office of Credit Ratings and NRSRO 
Regulation: Past, Present, and Future (Feb. 
24, 2020).35 OCR then-Director Jessica Kane 
delivered a speech describing the NRSRO 
regulatory framework and certain regulatory 
requirements; OCR’s responsibility for 
administering this regulatory framework; and 
observed trends in NRSRO compliance. The 
speech referenced the Commission’s August 
2019 rule release36 (discussed in the final bullet 
point under this section of the Report) and 
invited interested parties to provide input on the 
effectiveness of Rule 17g-5(a)(3). 

31 Available at https://www.sec.gov/news/public-statement/covid-19-monitoring-group-2020-07-15. 
32 Available at https://www.sec.gov/litigation/admin/2020/34-88880.pdf. 
33 Available at https://www.sec.gov/ocr/EJRNoActionLetter/EJR_Letter_3-30-20_1.pdf. 
34 See Letter from EJR to OCR Staff (Mar. 30, 2020), available at https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20 

No-Action_%20Application_3-30-2020.pdf. 
35 OCR Former Director Jessica Kane, Speech, The SEC’s Office of Credit Ratings and NRSRO Regulation: Past, Present, 

and Future (Feb. 24, 2020), available at https://www.sec.gov/news/speech/speech-jessica-kane-2020-02-24. 
36 See Amendments to Rules for Nationally Recognized Statistical Rating Organizations, Release No. 34-86590 (Aug. 7, 

2019), 84 FR 40247, 40250 (Aug. 14, 2019) (“2019 Adopting Release”), available at https://www.govinfo.gov/content/ 
pkg/FR-2019-08-14/pdf/2019-17218.pdf. 

A N N U A L  R E P O R T  |  7 

https://www.sec.gov/news/public-statement/covid-19-monitoring-group-2020-07-15
https://www.sec.gov/litigation/admin/2020/34-88880.pdf
https://www.sec.gov/ocr/EJRNoActionLetter/EJR_Letter_3-30-20_1.pdf
https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20No-Action_%20Application_3-30-2020.pdf
https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20No-Action_%20Application_3-30-2020.pdf
https://www.sec.gov/news/speech/speech-jessica-kane-2020-02-24
https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://2020).35
https://17g-3(a)(1).34
https://2020).33
https://2020).32
https://2020).31


  

 
 
 
 
 
 

 
 

 
 
 

 
  

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
 

 
 

 
 

 
 

 
 
 

 
 

 
 

§	2019 Summary Report of Commission Staff’s 
Examinations of Each Nationally Recognized 
Statistical Rating Organization, dated January 
2020, as required under Section 15E(p)(3)(C).37 

The report summarizes essential findings of the 
examinations conducted by Staff under Section 
15E(p)(3)(C). 

§	Annual Report on Nationally Recognized 
Statistical Rating Organizations, dated January 
2020 (“January 2020 Annual Report”), as 
required by Section 6 of the Rating Agency 
Act.38 The Annual Report addresses the matters 
described in the first paragraph under Section I 
of this Report. 

§	2019 Adopting Release.39 The Commission 
adopted an amendment to Rule 17g-5(a)(3) that 
provides for an exemption from the rule with 
respect to credit ratings for certain structured 
finance products where the issuer is a non-U.S. 
person and the NRSRO has a reasonable basis to 
conclude that the structured finance product 
will be offered and sold exclusively outside the 
United States. In the 2019 Adopting Release, the 
Commission directed the Staff to further evaluate 
the effectiveness of Rule 17g-5(a)(3) with respect 
to ratings of structured finance products that 
are not eligible for relief under the exemption. 
The Commission also adopted conforming 
amendments to similar exemptions in Rule 
17g-7(a) and Rule 15Ga-2. 

37 Available at https://www.sec.gov/files/nrsro-summary-report-2019.pdf. 
38 Available at https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf. 
39 84 FR at 40250. 

8 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/files/nrsro-summary-report-2019.pdf
https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf
https://Release.39
https://15E(p)(3)(C).37


  

 
 
 

 
 

 
 

 
 

 

 
 

 
 

 
 

 
 

 
  

 

   
 
 
 

 
  

 

  
 

 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 

  
 

 IV. Competition 

A. SELECT NRSRO STATISTICS 

S
ections 1 through 3 below summarize and 
discuss certain information reported by 
NRSROs on Form NRSRO or pursuant 
to Rule 17g-3 that provides insight into 

the state of competition among NRSROs. While 
this information indicates that the larger NRSROs 
continue to account for the highest percentages of 
outstanding ratings, other information suggests that 
smaller NRSROs have gained ratings share in certain 
asset classes.40 

1. NRSRO Credit Ratings Outstanding 

Each NRSRO annually reports the number of credit 
ratings outstanding, as of the end of the preceding 
calendar year, in each rating category for which it is 
registered.41 This information, for the calendar year 
ending December 31, 2019, is summarized in Charts 
2 through 5 below and can be useful in determining 
the breadth of an NRSRO’s coverage with respect 
to issuers, obligors, and securities or money market 
instruments within a particular rating category. 

Chart 2 depicts the number of credit ratings each 
NRSRO had outstanding in each rating category 

for which it was registered as of December 31, 
2019. Chart 3 shows the percentage of credit ratings 
each NRSRO had outstanding across all rating 
categories and also breaks out the percentages 
for each NRSRO in each of the rating categories. 
Chart 4 illustrates the relative size of each rating 
category based on the aggregate number of ratings 
reported outstanding by all NRSROs. Chart 5 
depicts the percentage of ratings each NRSRO had 
outstanding across all rating categories other than 
the government securities category. 

Comparing the number of ratings outstanding for 
established NRSROs and newer NRSROs may not 
provide as comprehensive a picture of the state of 
competition as comparing the number of ratings 
issued by such NRSROs in a given period. Certain 
NRSROs (particularly the larger NRSROs) have 
a longer history of issuing ratings and their ratings 
include those for debt obligations and obligors that 
were rated well before the establishment of the 
newer entrants.42 Consequently, the information 
described in Section IV.B of this Report (relating 
to recent market share developments in the asset-
backed securities rating category) may provide 

40 As discussed in Section IV.B.1 of this Report, information available on the websites of Commercial Mortgage Alert 
(https://www.cmalert.com/) and Asset-Backed Alert (https://www.abalert.com/) regarding NRSRO market shares in the 
asset-backed securities category indicates that some of the smaller NRSROs have developed significant market shares in 
such rating category over the past few years. In addition, Section IV.B.2 of this Report provides examples of certain asset 
classes in which it has been reported that smaller NRSROs have gained market share. 

41 Annual certifications on Form NRSRO must be filed with the Commission on EDGAR pursuant to Rule 17g-1(f) and 
made publicly available without cost on each NRSRO’s website pursuant to Rule 17g-1(i). The number of outstanding 
credit ratings for each rating category for which an NRSRO is registered is reported on Item 7A of Form NRSRO. 

42 The ratings counts disclosed on Item 7A of Form NRSRO include outstanding credit ratings, regardless of when they were 
issued. As a result, the ratings counts of the more established NRSROs may include credit ratings that were issued before 
the newer entrants began issuing credit ratings. These earlier ratings will continue to be included in the disclosed ratings 
counts until the credit ratings are withdrawn, either because the rated securities have been repaid or otherwise. Because 
outstanding ratings are included in the ratings counts, historical results factor significantly into the disclosed number of 
ratings, making it more difficult to discern current-year trends and identify gains achieved by the newer entrants. 

A N N U A L  R E P O R T  |  9 

https://www.cmalert.com/
https://www.abalert.com/
https://entrants.42
https://registered.41
https://classes.40


  

 
 

 
 

 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 

 
  

 
 
 
 

 
 

  
 

 

  

  

 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 

 
 

 
 

 

additional insight regarding how newer entrants are 
competing with more established rating agencies, 
specifically in the asset-backed securities rating 
category. 

There are additional limitations to assessing the 
state of competition in each rating category and in 
the aggregate based on the number of outstanding 
ratings. For instance, some NRSROs have pursued 
business strategies to specialize in particular rating 
categories or sub-categories43 and may not desire 
to issue ratings in certain of the other NRSRO 
rating categories. Also, the reported information 
does not reflect any credit ratings being issued by 
NRSROs in rating categories in which they are not 
registered with the Commission, nor does it reflect 
ratings issued by an affiliate of an NRSRO unless 
the affiliate is identified as a credit rating affiliate on 
Item 3 of Form NRSRO. 

Further, when reporting its outstanding ratings, 
each NRSRO makes its own determination of the 
applicable rating category into which each of its 
ratings falls. The classification of ratings into the five 
rating categories is not necessarily consistent across 
NRSROs. In addition, to the extent NRSROs have 
adjusted their ratings count disclosures in accordance 
with the amended Instructions to Form NRSRO, 
it may be more difficult to draw comparisons to 
ratings counts disclosed in prior years.44 

Chart 2 provides the number of outstanding credit 
ratings reported by each NRSRO in its annual certi-
fication for the calendar year ending December 31, 
2019, in each of the five rating categories identified 
in Section 3(a)(62) for which the NRSRO is regis-
tered, as applicable. 

Chart 3 displays the percentage of each NRSRO’s 
outstanding credit ratings of the total outstanding 
credit ratings of all NRSROs, for each rating 
category in which the NRSRO was registered, as 
reported by each NRSRO in its annual certification 
for the calendar year ending December 31, 2019.45 

The larger NRSROs account for 95.1% of all 
the ratings outstanding as of December 31, 
2019—slightly lower than their 95.4% share as 
of December 31, 2018.46 The share of outstanding 
credit ratings of the larger NRSROs decreased in 
three of the five categories, most significantly in the 
asset-backed securities category, which decreased by 
2.3 percentage points. 

Charts 2 and 3 also show that AMB, one of the 
smaller NRSROs, had the most credit ratings 
outstanding in the insurance category. In each of the 
past six years, AMB reported that it had the most 
credit ratings outstanding in the insurance category.47 

43 For example, AMB has traditionally focused on rating insurance companies and their affiliates. 
44 Effective January 1, 2015, Item 7A of Form NRSRO and the corresponding Instructions were amended to clarify the 

manner in which the number of outstanding credit ratings should be calculated and presented. The clarifying amendments 
were designed to help ensure that disclosures on Item 7A of Form NRSRO are consistent across NRSROs. The change 
in Instructions may have caused some NRSROs to modify the way they count ratings for purposes of Item 7A of Form 
NRSRO, which may affect comparisons to disclosures made in prior years. See Nationally Recognized Statistical Rating 
Organizations, Release No. 34-72936 (Aug. 27, 2014), 79 FR 55077, 55220-22 (Sept. 15, 2014) (“2014 Adopting 
Release”), available at https://www.govinfo.gov/content/pkg/FR-2014-09-15/pdf/2014-20890.pdf (discussing the clarifying 
amendments to Item 7A of Form NRSRO). 

45 For example, according to Chart 2, AMB reported that it had 7,171 insurance company credit ratings, and the total of 
the credit ratings in that category reported by all NRSROs was 20,990. Therefore, the percentage of NRSRO insurance 
company ratings attributable to AMB was approximately 34.2% (i.e., 7,171 divided by 20,990, expressed as a percentage), 
as shown on Chart 3. 

46 In 2007, the year when NRSROs began reporting outstanding ratings on Form NRSRO, these three NRSROs accounted 
for 98.8% of all outstanding ratings. 

47 See Annual Reports for prior years, which can be found under “Annual Reports to Congress” in the “Reports and Studies” 
section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html. 

10 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.govinfo.gov/content/pkg/FR-2014-09-15/pdf/2014-20890.pdf
https://www.sec.gov/ocr/ocr-reports-and-studies.html
https://category.47
https://years.44


  

     

 

     

 

 

 

Chart 2: Number of Outstanding Credit Ratings as of December 31, 2019 by Rating Category* 

NRSRO 
Financial 

Institutions 
Insurance 

Companies 
Corporate 

Issuers 
Asset-Backed 

Securities 
Government 

Securities 
Total Ratings 

AMB N/R 7,171 998 5 N/R 8,174 

DBRS 10,592 166 4,185 22,217 20,699 57,859 

EJR 9,752 881 7,321 N/R N/R 17,954 

Fitch 35,312 3,302 20,193 34,080 185,367 278,254 

HR 677 N/R 313 N/R 401 1,391 

JCR 949 78 2,797 N/R 339 4,163 

KBRA 1,101 106 220 12,791 135 14,353 

MIS 35,583 2,516 31,908 49,388 562,320 681,715 

S&P 55,608 6,770 55,118 36,539 914,907 1,068,942 

Total 149,574 20,990 123,053 155,020 1,684,168 2,132,805 

* N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date. 

Source: NRSRO annual certifications for the 2019 calendar year, Item 7A on Form NRSRO. 

Chart 3: Percentage by Rating Category of Each NRSRO’s Outstanding Credit Ratings of the Total 
Outstanding Credit Ratings of all NRSROs as of December 31, 2019* 

NRSRO 
Financial 

Institutions 
Insurance 

Companies 
Corporate 

Issuers 
Asset-Backed 

Securities 
Government 

Securities 
Total Ratings 

AMB N/R 34.2% 0.8% 0.0% N/R 0.4% 

DBRS 7.1% 0.8% 3.4% 14.3% 1.2% 2.7% 

EJR 6.5% 4.2% 5.9% N/R N/R 0.8% 

Fitch 23.6% 15.7% 16.4% 22.0% 11.0% 13.0% 

HR 0.5% N/R 0.3% N/R 0.0% 0.1% 

JCR 0.6% 0.4% 2.3% N/R 0.0% 0.2% 

KBRA 0.7% 0.5% 0.2% 8.3% 0.0% 0.7% 

MIS 23.8% 12.0% 25.9% 31.9% 33.4% 32.0% 

S&P 37.2% 32.3% 44.8% 23.6% 54.3% 50.1% 

* N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date. 

Percentages have been rounded to the nearest one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 calendar year, Item 7A on Form NRSRO. 

A N N U A L  R E P O R T  |  11 



  

  
  

  
  

 
 

 
 

 
 
 
 
 
 

 

 
 

 
 

 

 
 

 
 
 

 
 

 
 

 
 

  

 

  

 

 
  

 Chart 4: Breakdown of Ratings Reported Chart 5: Breakdown of Non-Government 
Outstanding as of December 31, 2019* Securities Ratings Reported Outstanding as of 

December 31, 2019* 

79.0% 

7.0% 

5.8%1.0% 
7.3% 

Government Securities 79.0% 
Financial Institutions 7.0% 
Insurance Companies 1.0% 
Corporate Issuers 5.8% 
Asset-Backed Securities 7.3% 

* Percentages have been rounded to the nearest 

one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 

calendar year, Item 7A on Form NRSRO. 

Chart 4 depicts the percentages of outstanding 
credit ratings attributable to each rating category, 
as reported by the NRSROs in their annual 
certifications for the calendar year ending 
December 31, 2019. 

As illustrated by Chart 4, as of December 31, 2019, 
the largest proportion of the aggregate credit ratings 
reported to be outstanding were in the government 
securities category, which may be attributable to the 
large number of government bond issuers and their 
multiple debt offerings. The government securities 
category accounted for 79.0% of the total number 
of credit ratings reported across all categories and, 
as shown on Chart 3, is also the most concentrated 
rating category, with the larger NRSROs accounting 
for 98.7% of all outstanding government ratings. 

0.9% 
0.2% 

1.8% 

34.3% 

26.6% 

3.2% 

8.3% 

4.0% 

20.7% 

HR 0.2% 
AMB 1.8% 
S&P 34.3% 

JCR 0.9% 
DBRS 8.3% KBRA 3.2% 
EJR 4.0% MIS 26.6% 
Fitch 20.7% 

* Percentages have been rounded to the nearest 

one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 

calendar year, Item 7A on Form NRSRO. 

Chart 5 depicts the percentages of the credit 
ratings outstanding that are attributable to each 
NRSRO over all the rating categories other than the 
government securities category, as reported by each 
NRSRO in its annual certification for the calendar 
year ending December 31, 2019. 

A comparison of Chart 5 to Chart 3 (which shows 
each NRSRO’s share of outstanding ratings over 
all the rating categories, including government 
securities) illustrates that there is less concentration 
in the non-government securities rating categories. 
S&P’s and MIS’s percentage share of all outstanding 
ratings declines by 15.8 and 5.4 percentage points, 
respectively, when government securities are 
excluded. Fitch’s percentage share of outstanding 
ratings, on the other hand, increases by 7.7 
percentage points when government securities are 

12 |  O F F I C E  O F  C R E D I T  R A T I N G S  



  

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
 

 
 

 
 
 

 
 

 

 
 

 
 

 

  
 

 

  
 

 

  
 

 

  

 
 

 

 

 

 

 

 
 

 
 
 

 
 

 
 
 

 
 

excluded. The percentage share for all the remaining 
NRSROs also increases when government securities 
are excluded. 

Further, when government securities are included in 
the total calculation, each of the smaller NRSROs, 
except for DBRS, has less than 1.0% of all 
outstanding ratings, making it difficult to assess their 
relative rating shares. When government securities 
are excluded, a clearer picture of the relative 
percentage shares of the smaller NRSROs in the 
categories in which they are active can be observed, 
as illustrated in Chart 5. The percentage share of 
each smaller NRSRO for all rating categories other 
than government securities as of December 31, 
2019 did not change significantly compared to their 
percentage share as of December 31, 2018.48 

As discussed above, Charts 2 through 5 reflect the 
number and percentages, respectively, of credit 
ratings outstanding as of December 31, 2019, which 
may include credit ratings that were issued years 
ago. As a result, the measure may not be indicative 
of the current market position of each NRSRO 
with respect to newly issued credit ratings. For a 
discussion of recent market share developments in 
the asset-backed securities rating category and other 
developments that could impact NRSRO market 
share, see Section IV.B of this Report. 

2. NRSRO Analytical Staffing Levels 

Chart 6 reports the number of credit analysts 
(including credit analyst supervisors) and the 
number of credit analyst supervisors employed by 
each of the NRSROs, as reported on Exhibit 8 to 
Form NRSRO.49 

Chart 6: NRSRO Credit Analysts 
and Credit Analyst Supervisors 

NRSRO 
Credit Analysts 

(Including Credit 
Analyst Supervisors) 

Credit Analyst 
Supervisors 

AMB 154 55 

DBRS 475 110 

EJR 23 12 

Fitch 1,277 312 

HR 52 10 

JCR 62 30 

KBRA 172 48 

MIS 1,732 278 

S&P 1,559 119 

Total 5,506 974 

Source: Exhibit 8 to Form NRSRO, in effect as of each 

NRSRO’s annual certification for the 2019 calendar 

year filed on or before March 30, 2020. 

The larger NRSROs report employing 4,568 credit 
analysts (including supervisors), which is approxi-
mately 83.0% of the total number employed by all 
of the NRSROs. Although the smaller NRSROs in 
the aggregate employ only approximately 17.0% 
of all credit analysts employed by NRSROs, this 
percentage has increased steadily in recent years.50 

During this time, some of the smaller NRSROs have 
reported significant increases in their analytical staff. 
Between the 2018 and 2019 calendar years, the 
number of credit analysts (including credit analyst 
supervisors) employed by smaller NRSROs, in the 
aggregate, increased 13.7%, compared to an increase 
of 0.6% at the larger NRSROs, in the aggregate. 

48 A comparison of Chart 5 in this Report with Chart 4 in Section IV.A.1 of the January 2020 Annual Report (available at 
https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf) shows that, except for DBRS, each smaller NRSRO’s total 
non-government market share as of December 31, 2019 remained constant or increased modestly (the largest increase was 
0.4% by KBRA) compared to the market shares as of December 31, 2018. 

49 Effective January 1, 2015, the Instructions for Exhibit 8 to Form NRSRO were amended to clarify that NRSROs must 
include credit analyst supervisors in the total number of credit analysts disclosed on Exhibit 8. This amendment was 
designed to enhance consistency of the disclosures on Exhibit 8 of Form NRSRO. See 2014 Adopting Release, 79 FR at 
55222 (discussing the clarifying amendments to Exhibit 8 of Form NRSRO). 

50 Based on reports by the NRSROs on their annual certifications for the applicable calendar year, the smaller NRSROs 
employed approximately 11.4% of all NRSRO analysts in 2014, 12.8% of all NRSRO analysts in 2015, 14.6% of all 
NRSRO analysts in 2016, 15.2% of all NRSRO analysts in 2017, and 15.4% of all NRSRO analysts in 2018. 

A N N U A L  R E P O R T  |  13 

https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf
https://years.50
https://NRSRO.49


  

 
 
 

 
 

 
 

 

 
 

 
 

  
 

 

   

   
 

 
 

  
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
 

 
 

 
 

 
 

 
 

 
 

  
 
 
 
 
 
 

  
 

 

 

 

 

 

 

 

 

3. NRSRO Revenue 

Chart 7 shows the percentage of total NRSRO 
revenues since 2016 that were accounted for by the 
larger NRSROs in the aggregate and by the smaller 
NRSROs in the aggregate.51 The percentage of 
aggregate NRSRO revenue reported by the larger 
NRSROs has gradually declined over this time 
period and the percentage of total revenue reported 
by the smaller NRSROs has correspondingly 
gradually increased. 

Chart 7: NRSRO Revenue Information: 
Fiscal Year Percentage of Total Reported 

NRSRO Revenue 

2019 2018 2017 2016 

Larger 
NRSROs 

93.3% 93.5% 94.1% 94.4% 

Smaller 
NRSROs 

6.7% 6.5% 5.9% 5.6% 

Total 100.0% 100.0% 100.0% 100.0% 

Source: Financial reports filed with the Commission 

under Rule 17g-3(a)(3) for the fiscal years ended 

2016 through 2019. For the preparation of this 

Report, if an NRSRO reported revenue in a foreign 

currency, the revenue was converted to U.S. dollars 

using the average exchange rate over all U.S. 

banking days in the fiscal year of such NRSRO. 

Further revenue information is available for 
NRSROs that are owned, in whole or in part, by 
public companies. The following information is from 
the 2019 annual reports of public companies with an 
ownership interest in an NRSRO: 

§	Moody’s Corporation, which is MIS’s parent 
company, reported a 6% increase in external 
revenue at MIS compared to 2018 results. 
The increase, according to the report, reflects 
higher revenue from rating corporate debt 
(both investment-grade and high-yield) resulting 
from both higher volumes of rated issuances 
reflecting favorable market conditions and 
favorable product mix. The report notes that the 
increase in revenue at MIS was partially offset 
by a decline in activity in bank loans and the 
CLO asset class primarily resulting from higher 
borrowing costs and shift in investor demand 
to fixed-rate instruments. The corporate finance 
group, financial institutions group, and public, 
project and infrastructure finance group of MIS 
had an increase in revenue compared to 2018 
results.52 

§	S&P Global Inc. (“S&P Global”), which is 
S&P’s parent company, indicated that revenue 
at S&P increased by 8% compared to its 
2018 results, due to an increase in transaction 
revenue. S&P Global attributed the increase 
in S&P’s revenue to an increase in corporate 
bond ratings revenue primarily driven by higher 
corporate bond issuance in the U.S. and Europe, 
which was partially offset by lower bank loan 
ratings revenue driven by reduced U.S. issuance 
volumes. The report also noted an increase in 
public finance revenue from increased issuance 
contributed to transaction revenue growth.53 

51 Under Rule 17g-3(a)(3), each NRSRO is required to file annually with the Commission an unaudited report providing 
revenue information, including revenue from determining and maintaining credit ratings, revenue from subscribers, revenue 
from granting licenses or rights to publish credit ratings, and revenue from other services and products. These reports are 
not required to be made publicly available by the NRSROs 

52 See Moody’s Corporation, Annual Report on Form 10-K for the year ended December 31, 2019, available at 
https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000005/mco-20191231.htm. 

53 See S&P Global, Annual Report on Form 10-K for the year ended December 31, 2019, available at 
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000055/spgi-20191231x10k.htm. 

14 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000005/mco-20191231.htm
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000055/spgi-20191231x10k.htm
https://growth.53
https://results.52
https://aggregate.51


  

 
 

 
 
 
 

 
 

 

 
 

 
 
 

 
 

 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

   

   

   
 

   

 
 

 
 

 
 

 
 
 

 

 
 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
 

 

§	Morningstar, Inc. indicated that NRSRO revenue 
for the twelve months ended December 31, 2018 
reflects MCR; NRSRO revenue for the first six 
months of 2019 includes revenue from MCR; 
and NRSRO revenue for the third and fourth 
quarters of 2019 includes revenue from DBRS, 
the newly combined credit ratings operations. 
For the six months ended December 31, 2019, 
approximately 63% of the revenue generated by 
DBRS was derived from one-time, transaction-
based fees driven by its provision of ratings on 
newly-issued securities; whereas the remainder 
can be classified as transaction-related, with 
recurring annual fees tied to surveillance, credit 
research, or other services. The combination of 
pre-integration DBRS and MCR’s U.S.-based 
credit ratings operations in 2019 makes it 
difficult to ascribe the origin of revenue growth 
to either entity. In 2019, Morningstar, Inc.’s 
consolidated revenue rose $159.1 million, or 
15.6%. DBRS contributed $91.3 million of 
revenue growth during 2019.54 

Recent regulatory filings also show increases in 
revenue at MIS and S&P in the first half of 2020. 
Moody’s Corporation reported a 23% increase 
in MIS external revenue in the first half of 2020, 
as compared to the first half of 2019, due to 
higher investment-grade rated issuance volumes 
as corporate issuers bolstered liquidity positions in 
response to COVID-19 uncertainties coupled with 
strong speculative-grade issuance despite a severe 
market disruption late in the first quarter.55 S&P 

Global reported a 22% increase in S&P revenue in 
the first half of 2020, as compared to the first half 
of 2019, primarily due to an increase in transaction 
revenue. S&P Global attributed the increased 
revenue to an increase in corporate bond ratings 
revenue primarily driven by higher corporate bond 
issuance in the U.S. mainly resulting from histori-
cally low borrowing costs and central bank lending 
actions that initially were announced at the end of 
the first quarter of 2020, which was partially offset 
by a decrease in bank loan ratings revenue.56 

Morningstar, Inc. indicated that NRSRO revenue for 
the six months ended June 30, 2019 reflects MCR; 
NRSRO revenue for the six months ended June 30, 
2020 reflects DBRS, the combined credit ratings 
operations. The combination of pre-integration 
DBRS and MCR’s U.S.-based credit ratings opera-
tions in 2019 makes it difficult to ascribe the origin 
of revenue growth to either entity. Morningstar, 
Inc. reported that many new issuance segments 
of the transaction-based credit rating business in 
both Europe and the U.S. slowed or paused during 
the second quarter as the pandemic persisted. 
However, DBRS benefited from record corporate 
issuance volumes in Canada, as many Canadian 
investment grade issuers accelerated their full year 
issuance plans into the second quarter. In the first six 
months of 2020, Morningstar, Inc.’s consolidated 
revenue increased 19.7% to $327.9 million. DBRS 
contributed $76.3 million of revenue growth during 
the first six months of 2020.57 

54 See Morningstar, Inc., Annual Report on Form 10-K for the year ended December 31, 2019, available at 
https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000041/morn10k12312019.htm. 

55 See Moody’s Corporation, Quarterly Report on Form 10-Q for the period ended June 30, 2020, available at 
https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000019/mco-20200630.htm. 

56 See S&P Global, Quarterly Report on Form 10-Q, for the period ended June 30, 2020, available at 
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000144/spgi-20200630.htm. 

57 See Morningstar, Inc., Quarterly Report on Form 10-Q for the period ended June 30, 2020, available at 
https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000161/morn-20200630.htm. 

A N N U A L  R E P O R T  |  15 

https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000041/morn10k12312019.htm
https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000019/mco-20200630.htm
https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000144/spgi-20200630.htm
https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000161/morn-20200630.htm
https://revenue.56
https://quarter.55


  

 
 

 

  

 
 
 

 
 

 
 
 

 
 

 
 

  
 
 
 
 

   
 

 
 

 
 

  
 

  
 
 

 

  
 

  

  
 

  

  
 

 
 

 

 

 
 
 

 
 

 
 

 
 
 

 
 
 
 
 

B. RECENT DEVELOPMENTS IN THE 
STATE OF COMPETITION AMONG 
NRSROs 

1. Market Share Observations in the 

Asset-Backed Securities Rating Category 

As noted in Section IV.A.1 of this Report, the 
number of ratings recently issued by NRSROs 
may give a clearer picture of competition than 
the number of ratings each NRSRO currently has 
outstanding. For example, Chart 3 indicates that, 
as of December 31, 2019, the smaller NRSROs 
collectively have 22.6% of the ratings outstanding in 
the asset-backed securities rating category. However, 
the market share data discussed in this Section 
IV.B show that higher market share percentages 
have been obtained by smaller NRSROs in ratings 
issuance with respect to certain types of asset-backed 
securities. This market share data continues the 

growth trend the Staff has observed since the 2012 
Annual Report for some smaller NRSROs in the 
asset-backed securities rating category. 

Sections (a) and (b) below discuss NRSRO market 
share information with respect to certain asset-
backed securities, as reported on the Commercial 
Mortgage Alert and Asset-Backed Alert websites.58 

Commercial Mortgage Alert shares information on 
one category of asset-backed securities: CMBS.59 

Asset-Backed Alert reports NRSRO market share 
information on three categories of asset-backed 
securities: (i) ABS;60 (ii) MBS;61 and (iii) CLO.62 

(a) CMBS 

Charts 8 through 11 provide information concerning 
U.S.63 CMBS ratings by NRSROs,64 as reported in 
the Commercial Mortgage Alert. NRSRO market 
share varies between the conduit CMBS and single-

58 See Commercial Mortgage Alert website, available at https://www.cmalert.com/ and Asset-Backed Alert website, available 
at https://www.abalert.com/. The information in Charts 8 through 11 is based on the Commercial Mortgage Alert website 
as of September 17, 2020, and the information in Charts 12 through 14 is based on the Asset-Backed Alert website as of 
September 17, 2020. Although the information available on these websites may provide insight into recent developments 
regarding the state of competition among NRSROs in the asset-backed securities rating category, it has certain limitations. 
For instance, the information treats each transaction as one undivided whole. An NRSRO is counted as having rated a 
transaction, and the aggregate amount of securities issued, even if the NRSRO rated only a portion of it. 

59 The “CMBS” category is comprised of transactions collateralized by mortgages or leases on commercial or multi-family 
income-producing properties (excluding commercial real estate collateralized debt obligations). See Commercial Mortgage 
Alert website, available at https://www.cmalert.com/. 

60 The “ABS” category is comprised of securities that are collateralized by assets other than the following: CMBS; MBS; 
Fannie Mae and Freddie Mac issues (other than risk transfer transactions); issuances by municipalities; tax exempt issues; 
issues that are fully retained by an affiliate of the deal sponsor; commercial paper and other continuously offered securities 
such as medium-term notes; CLOs and other collateralized debt obligations; and refinancings of previously offered 
securities. See Asset-Backed Alert website, available at https://www.abalert.com/. 

61 The “MBS” category is comprised of securities secured by U.S. first-lien mortgages on residential properties (excluding 
Fannie Mae and Freddie Mac issues, securities secured by non-performing or re-performing mortgages, subprime 
mortgages, or mortgages financing single-family rental businesses, and refinancings of previously offered securities). See id. 

62 The “CLO” category is comprised of arbitrage collateralized loan obligations secured by broadly syndicated corporate 
loans and middle market collateralized loan obligations secured by loans to small to medium sized enterprises. See id. 

63 References to “U.S.” CMBS, MBS, ABS, and CLO issuance and market shares in this Section IV.B.1 and Section IV.B.2 
reflect securities issued for sale primarily in the U.S., which include securities issued publicly and those issued under Rule 
144A under the Securities Act of 1933, as amended (the “Securities Act”). See Asset-Backed Alert website, available at 
https://www.abalert.com/; Commercial Mortgage Alert website, available at https://www.cmalert.com/. 

64 For purposes of Charts 8 through 11, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated 
and presented for DBRS. This includes information for all of 2018 and 2019. Please refer to the January 2020 and 
December 2018 Annual Reports for information for pre-integration DBRS and MCR. 

16 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.abalert.com/
https://www.cmalert.com/
https://www.abalert.com/
https://www.abalert.com/
https://www.cmalert.com/
https://www.cmalert.com
https://websites.58borrower CMBS segments,65 the two segments 
that account for most of the non-agency66 U.S. 
CMBS transactions rated by NRSROs. The charts 
include reported market share information for total 
non-agency U.S. CMBS transactions,67 U.S. conduit 
CMBS transactions, U.S. single-borrower CMBS 
transactions, and agency CMBS transactions68 for 
calendar year 2018, calendar year 2019, and the first 
half of calendar year 2020. 

Charts 8 through 10 show that in 2018, 2019, and 
the first half of 2020 the larger NRSROs generally 
obtained the highest market shares in rating 
non-agency U.S. CMBS transactions, but smaller 
NRSROs have achieved significant market shares as 
well. In the first half of 2020, each NRSRO active 
in rating non-agency U.S. CMBS had market shares 
greater than 34.9%. 

S&P has continued to gain market share in the U.S. 
conduit CMBS segment. S&P had the second-highest 
market share in this segment during 2019 and 
the first half of 2020, rating more than half of the 
transactions over that period. KBRA had the second-
highest market share in the U.S. conduit CMBS 

segment in 2018, and the third-highest ranking in 
2019 and the first half of 2020. In each of 2017, 
2018, 2019, and the first half of 2020, KBRA has 
rated more than half of these transactions. 

The relative size (proportionate to total U.S. CMBS 
issuance) of the U.S. single-borrower segment had 
been almost half of the non-agency U.S. CMBS 
transactions for the past two years. However, in 
the first half of 2020, due to a decline in issuance, 
the U.S. single-borrower segment accounted for 
about a third of all non-agency U.S. CMBS transac-
tions. KBRA gained market share in this segment, 
achieving the second highest market share in the 
first half of 2020, albeit rating only three out of the 
twenty transactions in the segment.69 

As illustrated in Chart 11, smaller NRSROs gained 
market share in the agency CMBS segment. In 2019 
and the first half of 2020, KBRA and DBRS had the 
second and third-highest market shares, respectively, 
each rating approximately half of the agency CMBS 
transactions. 

65 The term “conduit” refers to a financial intermediary that functions as a link, or conduit, between the lender(s) originating 
loans and the ultimate investor(s). The conduit makes loans or purchases loans from third party correspondents under 
standardized underwriting parameters and once sufficient volume has accumulated, pools the loans for sale to investors 
in the CMBS market. See https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20 
Revised%202014%20-Update.pdf. In contrast, a single-borrower transaction includes commercial mortgage loans made to 
a single-borrower. 

66 “Non-agency” CMBS refers to CMBS that are not issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. 
“Agency” CMBS generally refers to CMBS that are issued or guaranteed by such entities. 

67 Total U.S. CMBS transactions include conduit CMBS, single-borrower CMBS, and other types of CMBS, such as 
distressed/non-performing CMBS transactions and re-securitizations of CMBS transactions. 

68 Only agency CMBS transactions with a rating from one or more NRSROs are included for determining NRSRO market 
share in the agency CMBS category. See Commercial Mortgage Alert website, available at https://www.cmalert.com/. 

69 The coronavirus pandemic contributed to a slowdown in the issuance of CMBS transactions in the first half of 2020, which 
impacted the NRSROs’ market shares in certain CMBS segments. In particular, the NRSROs’ market shares in the U.S. 
single-borrower segment were skewed because one transaction accounted for a third of the volume in the first half of 2020. 
See Commercial Mortgage Alert, July 17, 2020. 

A N N U A L  R E P O R T  |  17 

https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20Revised%202014%20-Update.pdf.
https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20Revised%202014%20-Update.pdf.
https://www.cmalert.com/
https://segment.69


  

 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

  

  
 

  
 

 
 

  
 

 
 

  
 

 
    

  
 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

 

  

 

 

 

Chart 8: Rating Agency Market Share for Total Non-Agency U.S. CMBS Issued 
in 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 
Rank Issuance deals Share Issuance deals Share Issuance deals Share 

($Mil.) (%) ($Mil.) (%) ($Mil.) (%) 

1 Fitch 23,369 26 77.8 56,048 66 57.3 50,422 63 65.5 

2 KBRA 14,383 15 47.9 45,924 56 47.0 30,302 38 39.4 

3 S&P 11,850 13 39.5 49,634 70 50.8 34,764 58 45.2 

4 DBRS 11,286 17 37.6 42,425 56 43.4 38,801 58 50.5 

5 MIS 10,476 19 34.9 42,184 55 43.1 32,851 44 42.7 

Total 
Rated 30,035 43 97,767 143 76,936 122 
Market 

* Chart 8 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

Chart 9: Rating Agency Market Share for U.S. Conduit CMB
in 2018, 2019, and First Half of 2020* 

S Issued 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 Fitch 15,313 16 100.0 49,154 52 100.0 40,249 44 100.0 

2 S&P 9,738 9 63.6 35,582 36 72.4 19,358 19 48.1 

3 KBRA 8,947 10 58.4 32,755 36 66.6 22,610 26 56.2 

4 DBRS 6,366 6 41.6 18,318 18 37.2 17,640 18 43.8 

5 MIS 4,848 6 31.7 14,836 17 30.2 20,891 25 51.9 

Total 
Rated 
Market 

15,313 16 49,154 52 40,249 44 

* Chart 9 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

18 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.cmalert.com/
https://www.cmalert.com/


  

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

  

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

Chart 10: Rating Agency Market Share for U.S. Single-Borrower CMBS Issued 
in 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 
Rank Issuance deals Share Issuance deals Share Issuance deals Share 

($Mil.) (%) ($Mil.) (%) ($Mil.) (%) 

1 Fitch 5,816 7 57.0 6,894 14 15.0 9,783 18 27.9 

2 KBRA 4,505 3 44.2 12,506 18 27.2 7,692 12 22.0 

3 MIS 3,396 9 33.3 26,518 36 57.6 11,796 18 33.7 

4 DBRS 2,688 7 26.4 23,368 35 50.7 20,864 38 59.6 

5 S&P 501 2 4.9 12,638 30 27.4 14,410 37 41.2 

Total 
Rated 10,201 20 46,060 83 35,003 73 
Market 

* Chart 10 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

Chart 11: Rating Agency Market Share for Agency CMBS Issued in 2018, 2019, and First Half of 2020* 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 Fitch 11,141 9 100.0 16,767 12 59.2 14,256 11 58.3 

2 KBRA 6,416 5 57.6 12,311 9 43.5 11,343 9 46.4 

3 DBRS 4,725 4 42.4 15,995 11 56.5 11,633 9 47.6 

4 MIS 0 0 0.0 5,862 4 20.7 9,011 7 36.9 

5 S&P 0 0 0.0 5,677 4 20.1 2,650 2 10.8 

Total 
Rated 
Market 

11,141 9 28,306 20 24,446 19 

* Chart 11 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Commercial Mortgage Alert website, available at 

https://www.cmalert.com/. The Staff has adjusted the presentation of the information by aggregating 

individual pre-integration DBRS and MCR information to present the information consistently as a combined 

entity, DBRS. See note 64. 

A N N U A L  R E P O R T  |  19 

https://www.cmalert.com/
https://www.cmalert.com/


  

 
 

 
 
 

 
 

 
 

 
 
 

 
 

  
 

  
 

  
 

  

 
 

 
 

 
 

 

 
 

 
 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

(b) ABS/MBS/CLO 

Charts 12 through 14 provide information 
concerning U.S. ABS, U.S. MBS, and U.S. CLO 
ratings by NRSROs,70 as reported in the Asset-
Backed Alert. The charts include reported market 
share information for these transactions for calendar 
years 2018, calendar year 2019, and the first half of 
calendar year 2020. 

Chart 12 shows that smaller NRSROs, in particular 
DBRS and KBRA, have built and maintained 
significant U.S. ABS rating market shares.71 DBRS 
has consistently attained a marketshare of over 
20% in each of 2018, 2019, and the first half of 
2020, and KBRA has maintained a market share of 
approximately 17.5% during the same time period.72 

Chart 13 shows that for the U.S. MBS market, 
KBRA obtained the third-highest market share in 
2018, and then the second-highest market shares in 
2019 and the first half of 2020. DBRS also obtained 
a large ratings share of this market, maintaining a 
market share of over 30% in 2018, 2019, and the 
first half of 2020. 

Chart 14 shows that the larger NRSROs have the 
highest market shares in the U.S. CLO segment. 
However, DBRS has attained some market share in 
the U.S. CLO segment, and KBRA began rating such 
transactions in 2019.73 

Chart 12: Rating Agency Market Shares for U.S. ABS Issued in 2018, 2019, and First Half of 2020* 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 S&P 77,262 113 63.3 192,315 313 57.4 184,537 296 57.8 

2 MIS 57,130 76 46.8 143,742 203 42.9 153,642 215 48.2 

3 Fitch 46,549 65 38.1 151,090 192 45.1 154,878 205 48.5 

4 DBRS 30,525 72 25.0 106,894 200 31.9 95,937 183 30.1 

5 KBRA 22,534 68 18.5 64,909 177 19.4 55,990 147 17.5 

Total 
Rated 
Market 

122,133 219 334,868 584 319,052 555 

* Chart 12 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Asset-Backed Alert website, available at 

https://www.abalert.com/. The Staff has adjusted the presentation of the information by aggregating individual 

pre-integration DBRS and MCR information to present the information consistently as a combined entity, DBRS. 

See note 70. 

70 For purposes of Charts 12 through 14, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated 
and presented for DBRS. This includes information for all of 2018 and 2019. Please refer to the January 2020 and 
December 2018 Annual Reports for information for pre-integration DBRS and MCR. 

71 See Section IV.B.2 of this Report for a discussion of specific ABS asset classes where the smaller NRSROs have reported 
success in gaining market share. 

72 COVID-19 contributed to a slowdown in the issuance of U.S. ABS transactions in the first half of 2020. See Asset-Backed 
Alert, July 3, 2020. 

73 COVID-19 contributed to a slowdown in the issuance of CLO transactions in the first half of 2020, which impacted the 
NRSROs’ market shares in this sector. See Asset-Backed Alert, July 10, 2020; Asset-Backed Alert, July 3, 2020. 

20 |  O F F I C E  O F  C R E D I T  R A T I N G S  

https://www.abalert.com/
https://period.72
https://shares.71


  

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

  
 

  
 

  
 

 
 

  
 

 
 

  
 

 
    

 

  

 

 

 

 Chart 13: Rating Agency Market Shares for U.S. MBS Issued in 2018, 2019, and First Half of 2020* 

1H-2020 
Rank 

NRSRO 1H-2020 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2019 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

2018 
Issuance 
($Mil.) 

No. of 
deals 

Market 
Share 
(%) 

1 MIS 8,149 16 54.7 19,074 44 67.4 17,245 36 67.3 

2 KBRA 7,762 17 52.1 13,126 33 46.4 11,757 27 45.9 

3 Fitch 6,959 21 46.7 8,664 29 30.6 10,610 28 41.4 

4 DBRS 4,692 10 31.5 11,871 27 42.0 15,367 29 60.0 

5 S&P 265 1 1.8 2,788 7 9.9 5,302 8 20.7 

Total 
Rated 
Market 

14,894 37 28,296 78 25,617 60 

* Chart 13 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Asset-Backed Alert website, available at 

https://www.abalert.com/. The Staff has adjusted the presentation of the information by aggregating individual 

pre-integration DBRS and MCR information to present the information consistently as a combined entity, DBRS. 

See note 70. 

Chart 14: Rating Agency Market Shares for 
U.S. CLO Issued in First Half of 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 
Rank Issuance deals Share Issuance deals Share Issuance deals Share 

($Mil.) (%) ($Mil.) (%) ($Mil.) (%) 

1 S&P 30,709 70 83.4 73,791 152 60.1 64,030 117 48.3 

2 Fitch 20,818 42 56.6 79,889 166 65.1 99,485 182 75.1 

3 MIS 7,313 17 19.9 73,538 155 59.9 88,546 170 66.8 

4 DBRS 330 1 0.9 3,424 8 2.8 10,077 18 7.6 

5 KBRA 0 0 0.0 5,678 13 4.6 0 0 0.0 

Total 
Rated 36,805 84 122,716 260 132,547 249 
Market 

* Chart 14 reflects market share percentages based on dollar amounts of issuance. The sum of the market share 

percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Source: Based on information available through the Asset-Backed Alert website, available at 

https://www.abalert.com/. The Staff has adjusted the presentation of the information by aggregating individual 

pre-integration DBRS and MCR information to present the information consistently as a combined entity, DBRS. 

See note 70. 

A N N U A L  R E P O R T  |  21 

https://www.abalert.com/
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2. Other Asset-Backed Securities Market 

Share Observations74 

As illustrated above, some of the smaller NRSROs 
have gained market share in the asset-backed 
securities rating category. In particular, the smaller 
NRSROs have gained market share rating asset-
backed securities backed by discrete asset types, 
especially newer or esoteric assets. 

For instance, smaller NRSROs are significant 
raters of securities backed by unsecured consumer 
loans, including consumer loans originated through 
marketplace lending platforms. KBRA and DBRS 
had the two highest market shares in this category 
during the Report Period, both rating approxi-
mately 57.8% of the transactions priced during 
such period.75 

Another example of market share gains achieved 
by smaller NRSROs in discrete asset classes 
is KBRA’s rating of securitizations backed by 
aircraft-lease receivables. KBRA rated each of the 
fifteen aircraft-lease receivables transactions (with 
an aggregate principal amount of $7.6 billion) 
that priced during the Report Period.76 KBRA has 
rated each aircraft-lease receivables transaction 
(fifty-seven in total) issued from December 2015 
through the end of the Report Period.77 

KBRA was also active rating whole-business securi-
tizations during the Report Period, rating 88.2% of 
the issuance amount of such transactions.78 KBRA’s 
market share in the whole-business category is 
further demonstrated when measured by the 
number of transactions rather than dollar amounts 
of issuance; KBRA rated nine of the eleven transac-
tions priced during the Report Period.79 

Smaller NRSROs have also been able to gain 
market share in rating more traditional types of 
asset-backed securities. During the Report Period, 
DBRS rated more traditional types of asset-
backed securities (aside from the MBS and CMBS 
categories) than the other smaller NRSROs. For 
example, DBRS rated 64.9% of the transactions 
backed by student loans that priced during the 
Report Period.80 DBRS also rated a sizable minority 
of one of the larger asset-backed securities asset 
classes—i.e., credit card transactions.81 DBRS rated 
23.6% of the credit card asset-backed securities 
priced during the Report Period.82 

DBRS has also been able to gain market share in 
auto-related asset-backed securities. During the 
Report Period, DBRS rated 40.9% of the auto-fleet 
lease transactions, 30.3% of the subprime auto loan 
transactions, 13.7% of the prime auto loan trans-

74 Unless noted otherwise, all market share percentages in this Section IV.B.2 are based on dollar amounts of issuance. The 
information in this Section IV.B.2 is from the Asset-Backed Alert database as of July 10, 2020. For purposes of this section, 
the information for pre-integration DBRS and MCR were aggregated to reflect their current operations as the combined 
entity, DBRS. See supra text accompanying note 70. 

75 See Asset-Backed Alert database. The Asset-Backed Alert database indicates that fifty-two unsecured consumer loan 
transactions totaling $17.1 billion priced during the Report Period. 

76 See id. 
77 See id. 
78 See id. The Asset-Backed Alert database indicates that eleven whole-business securitization transactions totaling $6.0 

billion priced during the Report Period. DBRS also rated two whole-business securitization transactions representing 9.4% 
of the transactions during the Report Period. 

79 See id. 
80 See id. The Asset-Backed Alert database indicates that forty student loan transactions totaling $17.2 billion priced during 

the Report Period. 
81 The Asset-Backed Alert database lists thirty-six credit card transactions totaling $19.4 billion that priced during the Report 

Period. 
82 See Asset-Backed Alert database. 

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actions, and 3.2% of the auto lease transactions that 
priced during the Report Period.83 KBRA has also 
established a market share presence in some of these 
auto-related asset-backed security categories, rating 
32.8% of the subprime auto loan transactions and 
1.0% of the prime auto loan transactions during the 
Report Period.84 

Smaller NRSROs have also achieved notable market 
share in certain types of residential mortgage-
backed securities not included in Chart 13. DBRS 
rated all but two of the transactions backed by 
non-performing or re-performing mortgages that 
priced in the Report Period.85 Additionally, DBRS 
and KBRA were active rating securities backed by 
subprime mortgages and risk transfer securities 
during the Report Period. For securities backed 
by subprime mortgages, DBRS rated 54.9% and 
KBRA rated 38.2%.86 For risk transfer securities, 
DBRS rated 51.4% and KBRA rated 31.8%.87 

C. BARRIERS TO ENTRY 
Barriers to entry continue to exist in the credit 
ratings industry, presenting competitive challenges 
for the smaller NRSROs. 

One such potential barrier that has been raised 
by certain smaller NRSROs are the investment 
management contracts of some institutional fund 
managers and the investment guidelines of some 
fixed income mutual fund managers, pension 
plan sponsors, and endowment fund managers, 
which require the use of ratings of specified rating 
agencies.88 The effect of these requirements can be 
to increase the demand for and liquidity of securities 
bearing the ratings of specified rating agencies. 
Historically, many of these guidelines refer to the 
ratings from the larger NRSROs by name (i.e., Fitch, 
MIS, and S&P). Despite reports in recent years that 
investors are increasingly changing their guidelines to 
allow for investments in securities rated by a wider 
group of NRSROs,89 investment guidelines continue 
to be identified as a factor impacting the selection of 
NRSROs to rate certain transactions.90 

A related barrier to entry is the inclusion require-
ments of some fixed income indices. To be included 
in certain of these indices, securities must be rated by 
specified NRSROs. Certain investment companies 
try to closely track the performance of the indices by 
purchasing the securities included in them, and can 

83 See id. For the Report Period, the Asset-Backed Alert database lists nine auto-fleet lease transactions totaling $6.1 billion, 
fifty-five subprime auto loan transactions totaling $26.7 billion, 108 prime auto loan transactions totaling $95.7 billion, 
and thirty-eight auto lease transactions totaling $30.0 billion. 

84 See id. 
85 See id. The Asset-Backed Alert database indicates that twenty-six non-performing or re-performing mortgage backed 

securities transactions totaling $16.5 billion priced during the Report Period 
86 See id. The Asset-Backed Alert database indicates that fifty-seven subprime mortgage-backed securities transactions totaling 

$20.9 billion priced during the Report Period. 
87 See id. The Asset-Backed Alert database indicates that twenty-eight risk transfer transactions totaling $23.6 billion priced 

during the Report Period. 
88 See Letter from KBRA to the Commission (Aug. 19, 2014), available at https://www.sec.gov/comments/s7-18-11/ 

s71811-88.pdf. This barrier to entry was also mentioned during the SEC’s Credit Ratings Roundtable held on May 
14, 2013. At the roundtable, a representative of MCR mentioned that, according to a study conducted by MCR, 
approximately 42% of open-end fixed income funds with investment guidelines that reference ratings specifically refer 
to S&P, MIS, or a “major NRSRO.” See Credit Rating Roundtable, May 14, 2013, available at https://www.sec.gov/ 
spotlight/credit-ratings-roundtable.shtml. 

89 See, e.g., Big Investors Accept More Rating Agencies, Asset-Backed Alert, May 19, 2017. 
90 See S&P Vaults Past Moody’s in Conduit Sector, Commercial Mortgage Alert, Jan. 24, 2020; S&P, Moody’s Duke It Out in 

Fitch’s Shadow, Commercial Mortgage Alert, Jan. 25, 2019. 

A N N U A L  R E P O R T  |  23 

https://www.sec.gov/comments/s7-18-11/s71811-88.pdf
https://www.sec.gov/comments/s7-18-11/s71811-88.pdf
https://www.sec.gov/spotlight/credit-ratings-roundtable.shtml
https://www.sec.gov/spotlight/credit-ratings-roundtable.shtml
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https://agencies.88
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thus increase the demand for securities bearing the 
ratings of particular NRSROs.91 For instance, Fitch 
announced that its ratings had been added to the 
J.P. Morgan High-Yield Bond Indices, noting that 
investors rely on such indices to determine which 
bonds suit their level of credit risk.92 

Market participants and academics have identified 
various other barriers to entry in the credit rating 
industry, including economic and regulatory 
barriers.93 Among the regulatory barriers to entry for 
NRSROs are the costs associated with complying 
with the statutory provisions implemented by the 
Rating Agency Act and the Dodd-Frank Act and the 
related rules adopted by the Commission, including 
the rules and rule amendments that the Commission 
adopted pursuant to the Dodd-Frank Act (the 
“NRSRO Amendments”).94 Commenters on the 
proposed NRSRO Amendments expressed 

concerns that certain of the requirements would 
be burdensome for smaller NRSROs to implement 
and could raise barriers to entry for credit rating 
agencies to seek to register as NRSROs.95 In 
connection with the NRSRO Amendments, the 
Commission acknowledged that, despite efforts 
to limit the impact on small entities, the Dodd-
Frank Act contained requirements, including those 
implemented by the NRSRO Amendments, which 
impose costs on NRSROs and may consequently 
create barriers to entry and have negative impacts on 
competition.96 The NRSRO Amendments as adopted 
by the Commission include various changes intended 
to address concerns regarding barriers to entry, 
including standards allowing NRSROs to tailor 
particular requirements to their business models, 
size, and rating methodologies.97 

91 See, e.g., Rating Firms Seek Changes to Index, Asset-Backed Alert, May 26, 2017. 
92 See Fitch Ratings Joins J.P. Morgan High Yield Bond Indices, Fitch Ratings, June 28, 2017. In a related example, 

DBRS announced that its ratings would be included in the determination of index credit quality classifications for 
CAD-denominated securities in the Bloomberg Barclays Canada Aggregate Index and the Global Aggregate Index, 
resulting in approximately 49 securities being added to the Canadian Aggregate Index. See DBRS Bond Ratings to Be 
Included in the Bloomberg Barclays Canada Aggregate Index, DBRS, Inc., Apr. 19, 2018. 

93 See, e.g., Section IV.C of the March 2012 Annual Report, available at https://www.sec.gov/divisions/marketreg/ 
ratingagency/nrsroannrep0312.pdf; Fitch Assigns ‘A-’ Rating to S&P’s Senior Unsecured Notes Offering, Outlook Stable, 
Fitch Ratings, Aug. 10, 2020; Fitch Assigns ‘BBB+’ Rating to Moody’s Senior Unsecured Notes Offering, Outlook Stable, 
Fitch Ratings, Aug. 4, 2020. 

94 See 2014 Adopting Release, 79 FR 55077 (Sept. 15, 2014), available at https://www.govinfo.gov/content/pkg/FR-2014-
09-15/pdf/2014-20890.pdf. 

95 See 2014 Adopting Release, 79 FR at 55090, 55154, 55161, and 55254-55. See also comment letters received with respect 
to the NRSRO Amendments as proposed, available at https://www.sec.gov/comments/s7-18-11/s71811.shtml. 

96 See 2014 Adopting Release, 79 FR at 55254. 
97 See Section IV.C of the December 2015 Annual Report, available at https://www.sec.gov/ocr/reportspubs/annual-

reports/2015-annual-report-on-nrsros.pdf. 

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https://www.sec.gov/divisions/marketreg/ratingagency/nrsroannrep0312.pdf
https://www.sec.gov/divisions/marketreg/ratingagency/nrsroannrep0312.pdf
https://www.sec.gov/comments/s7-18-11/s71811.shtml
https://www.sec.gov/ocr/reportspubs/annual-reports/2015-annual-report-on-nrsros.pdf
https://www.sec.gov/ocr/reportspubs/annual-reports/2015-annual-report-on-nrsros.pdf
https://www.govinfo.gov/content/pkg/FR-2014
https://methodologies.97
https://competition.96
https://NRSROs.95
https://Amendments�).94
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V. Transparency 

C
ongress described the Rating Agency Act 
as an Act to improve ratings quality for 
the protection of investors and in the 
public interest “by fostering accountability, 

transparency, and competition in the credit rating 
agency industry.”98 Section 932 of the Dodd-Frank 
Act is entitled “Enhanced regulation, accountability, 
and transparency of NRSROs.” Both Acts contain 
various provisions designed to increase the trans-
parency—through clear disclosure open to public 
scrutiny—of, among other things, NRSROs’ credit 
rating procedures and methodologies, business 
practices, and credit ratings performance. Under 
Exchange Act rules, NRSROs are required to 
disclose: 

§	standardized performance statistics;99 

§	consolidated information about credit rating 
histories;100 

§	information about material changes and 
significant errors in the procedures and 
methodologies used to determine credit ratings;101 

§	information about specific rating actions;102 and 
§	clear definitions of each symbol, number, or score 

in the rating scale used by the NRSRO.103 

98 See the preamble to the Rating Agency Act. 
99 See Instructions for Exhibit 1 to Form NRSRO. 
100 See Rule 17g-7(b). 
101 See Rule 17g-8(a)(4). 
102 See Rule 17g-7(a). 
103 See Rule 17g-8(b)(2). 
104 See Rule 17g-7(a). 
105 See Rule 17g-7(a)(1)(ii). 

NRSROs must also disclose certain information in 
connection with each rating action.104 Such infor-
mation includes, among other things, the version of 
the procedure or methodology used to determine 
the credit rating, a description of the types of data 
that were relied upon for purposes of determining 
the credit rating, an assessment of the quality of 
information available and considered in determining 
the credit rating, and information on the sensitivity 
of the credit ratings to assumptions made by the 
NRSRO.105 

In addition to or in connection with required 
disclosures, NRSROs often issue press releases and 
reports at the time of a rating action to describe 
the rationale behind such rating action, and make 
versions of methodologies for determining credit 
ratings available on their websites.106 The avail-
ability of underlying methodologies, together with a 
report discussing the analysis supporting the rating 
action, may provide additional transparency into an 
NRSRO’s credit analysis and credit rating process. 

106 The reports accompanying a rating action are frequently available on a paid subscription basis, although some NRSROs 
provide access to such reports for free. 

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From time-to-time, NRSROs also publish revisions 
and updates to their methodologies. They may also 
at times publish revisions to the assumptions that are 
inputs to their methodologies and rating approaches, 
including changes to their economic outlooks or 
default rate assumptions. Revised methodologies 
and related assumptions may provide additional 
transparency into changes in the NRSROs’ credit 
views and analyses. 

NRSROs may also provide transparency to the 
extent they publish commentaries or research. 
NRSROs publish commentaries and research that 
generally include data, analyses, or projections on 
market sectors and economic outlooks.107 These 
publications may be helpful to investors to under-
stand industry trends and the NRSROs’ credit views. 
For example, following the emergence of COVID-19 
in early 2020, NRSROs began publishing commen-
taries and research that provide their perspectives on 
the potential credit and rating impacts of COVID-19 
on issuers and debt obligations in different market 
sectors. They also began publishing COVID-19-re-
lated commentaries on economic and market trends. 

107 NRSROs may also make market and economic data separately available. 

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 VI. Conficts of Interest 

N
RSROs operate under one or more business 
models, each having potential conflicts of 
interest. Most of the NRSROs primarily 
operate under the “issuer-pay” model, 

which is subject to a potential conflict in that the 
credit rating agency may be influenced to determine 
more favorable (i.e., higher) ratings than warranted 
to retain the obligors or issuers as clients. Certain 
NRSROs may also operate under the “subscriber-
pay” model, which means that investors pay a 
subscription fee to access an NRSRO’s ratings. 
This model is also subject to potential conflicts of 
interests. For example, an NRSRO may be aware 
that an influential subscriber holds a securities 
position (long or short) that could be advantaged 
if a credit rating upgrade or downgrade causes the 
market value of the security to increase or decrease 
or that a subscriber invests in newly issued bonds 
and would obtain higher yields if the bonds were to 
have lower ratings. 

Section 15E and the related Commission rules 
address conflicts of interest.108  For example, Rule 
17g-5 identifies certain conflicts of interest that 
are prohibited under all circumstances109 and other 
conflicts of interest that are prohibited unless an 
NRSRO has publicly disclosed the existence of the 
conflict and has implemented policies and proce-
dures reasonably designed to address and manage 
such conflict.110 

Among the conflicts of interest identified in Rule 
17g-5 are conflicts involving individual credit 
analysts or other employees of an NRSRO. For 
example, an NRSRO is prohibited from issuing or 
maintaining a credit rating for a person where an 
employee of the NRSRO that participated in deter-
mining, or is responsible for approving, the credit 
rating directly owns securities of, or is an officer or 
director of, the person that would be subject to the 
credit rating.111 

Rule 17g-5(c)(8) is another example of a prohibited 
conflict of interest involving persons within an 
NRSRO. Under the Rule, an NRSRO is prohibited 
from issuing or maintaining a credit rating where 
a person within the NRSRO who participates in 
determining or monitoring the rating, or developing 
or approving procedures or methodologies used for 
determining the rating, also (a) participates in sales 
or marketing activities of the NRSRO or its affiliate, 
or (b) is influenced by sales or marketing consider-
ations.112 

Other statutory provisions and Commission rules 
address potential conflicts of interest that may arise 
when a credit analyst seeks employment outside 
the NRSRO. Section 15E requires each NRSRO 
to have policies and procedures in place to provide 
for an internal “look-back” review process in order 
to determine whether any conflict of interest of a 
former employee influenced a credit rating in certain 

108 See, e.g., Section 15E(h); Rule 17g-5. 
109 See Rule 17g-5(c). 
110 See Rule 17g-5(a)(1)-(2); Rule 17g-5(b); Instructions for Exhibits 6 and 7 to Form NRSRO. In addition, Section 15E(t)(3) 

(B) requires an NRSRO’s board of directors to oversee the establishment, maintenance, and enforcement of policies and 
procedures to address, manage, and disclose any conflicts of interest. 

111 See Rule 17g-5(c)(2); Rule 17g-5(c)(4). 
112 See Rule 17g-5(c)(8). 

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instances.113  Rule 17g-8(c) requires an NRSRO’s 
policies and procedures to address instances in which 
a “look-back” review determined that a conflict of 
interest influenced a credit rating. Such policies and 
procedures are required to be reasonably designed 
to ensure that the NRSRO will promptly determine 
whether a credit rating must be revised and promptly 
publish a revised credit rating or an affirmation of 
the credit rating, along with certain disclosures about 
the existence of the conflict.114 

One of the conflict of interest rules concerns the 
issuer-pay conflict of interest relating to structured 
finance products. The Commission adopted Rule 
17g-5(a)(3) in 2009 to address this conflict of 
interest. Since the June 2, 2010 compliance date of 
Rule 17g-5(a)(3), an exemption has been in effect 
with regard to structured finance products issued by 
non-U.S. issuers in transactions outside the United 
States. As described in the final bullet point under 

Section III.B above, the Commission codified the 
exemption in August 2019. In the adopting release, 
the Commission directed the Staff to further evaluate 
the effectiveness of Rule 17g-5(a)(3) with respect to 
ratings of structured finance products that are not 
eligible for relief under the adopted exemption.115 

Towards this end, in a February 2020 speech, former 
Director Kane welcomed input and engagement 
from all interested parties on the effectiveness of 
Rule 17g-5(a)(3).116 

The annual examinations conducted by Staff 
in accordance with Section 15E(p) are required 
to include, among other things, a review of 
the management of conflicts of interest by the 
NRSROs.117  Information regarding the examina-
tions, including any essential findings with respect 
to the required review areas, is included in OCR’s 
annual examination reports.118 

VII. Conclusion 

The Staff will continue to conduct its oversight other activities in furtherance of OCR’s regulatory 
function with respect to NRSROs, including the mission, as described in this Report. 
performance of Staff examinations, and engage in 

113 See Section 15E(h)(4)(A). 
114 See Rule 17g-8(c). 
115 See 2019 Adopting Release, 84 FR 40247, 40250 (Aug. 14, 2019), available at https://www.govinfo.gov/content/pkg/ 

FR-2019-08-14/pdf/2019-17218.pdf. 
116 See OCR Former Director Jessica Kane, Speech, supra note 35. Further details about this speech can be found in the sixth 

bullet point under Section III.B above. 
117 See Section 15E(p)(3)(B)(ii). 
118 The examination reports can be found under “Summary Examination Reports” in the “Reports and Studies” section of the 

OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html. 

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https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://www.govinfo.gov/content/pkg/FR-2019-08-14/pdf/2019-17218.pdf
https://www.sec.gov/ocr/ocr-reports-and-studies.html


A N N U A L  R E P O R T  |     29 



U . S .  S E C U R I T I E S  A N D  E X C H A N G E  C O M M I S S I O N  

Washington, DC