Big Three (credit rating agencies)

The Big Three credit rating agencies are Standard & Poor's (S&P), Moody's, and Fitch Group. S&P and Moody's are based in the US, while Fitch is dual-headquartered in New York City and London, and is controlled by Dearst. As of 2013 they hold a collective global market share of "roughly 95 percent" with Moody's and Standard & Poor's having approximately 40% each, and Fitch around 15%.

According to an analysis by Deutsche Welle, "their special status has been cemented by law — at first only in the United States, but then in Europe as well." From the mid-1990s until early 2003, the Big Three were the only "Nationally Recognized Statistical Rating Organizations (NRSROs)" in the United States — a designation meaning they were used by the US government in several regulatory areas. (Four other NRSROs merged with Fitch in the 1990s.)

The European Union has considered setting up a state-supported EU-based agency.

The Big Three have been "under intense scrutiny" since the 2007-2009 global financial crisis following their favorable pre-crisis ratings of insolvent financial institutions like Lehman Brothers, and risky mortgage-related securities that contributed to the collapse of the U.S. housing market.

In the wake of the financial crisis, the Financial Crisis Inquiry Report called the "failures" of the Big Three rating agencies "essential cogs in the wheel of financial destruction".

The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies.

In their book on the crisis, journalists Bethany McLean, and Joe Nocera, criticized rating agencies for continuing "to slap their triple-A [ratings]s on subprime securities even as the underwriting deteriorated – and as the housing boom turned into an outright bubble" in 2005, 2006, and 2007. McLean and Nocera blamed the practice on "an erosion of standards, a willful suspension of skepticism, a hunger for big fees and market share, and an inability to stand up to" investment banks issuing the securities. The February 5, 2013 issue of The Economist stated "it is beyond argument that ratings agencies did a horrendous job evaluating mortgage-tied securities before the financial crisis hit."

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