# U.S. Securities and Exchange Commission

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URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3Af38a9a8fa6485fa7

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

U.S. Securities and Exchange Commission

Office of Credit Ratings

Staff Report
ON

NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATIONS
FEBRUARY | 2024
As Required by Section 6 of the Credit Rating Agency Reform Act of 2006
and Section 15E(p)(3)(C) of the Securities Exchange Act of 1934

This is a report of the Staff of the U.S. Securities and Exchange Commission. Staff reports, Investor Bulletins, and
other staff documents represent the views of Commission staff and are not a rule, regulation, or statement of the
Commission. The Commission has neither approved nor disapproved the content of these documents and, like all
staff statements, they have no legal force or effect, do not alter or amend applicable law, and create no new or
additional obligations for any person. The Commission has expressed no view regarding the analysis, findings, or
conclusions contained herein.

02

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

CONTENTS
CHARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
I.

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II.

STATUS OF REGISTRANTS AND APPLICANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. EXAMINATIONS AND MONITORING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B.

Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C.

Monitoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

D.

2023 Section 15E(p)(3) Examinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Terms Used in This Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Summary of Essential Findings and Responses to Material Regulatory Deficiencies. . . . 11
4. Responses to Recommendations from the 2022 Section 15E Examinations. . . . . . . . . 19

IV. STATE OF COMPETITION, TRANSPARENCY, AND CONFLICTS OF INTEREST . . . . . . . . . . . 21
A. Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
1. Select NRSRO Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2. Market Share Observations in the Asset-Backed Securities Rating Category. . . . . . . . . 31
3. Barriers to Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

V.

B.

Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

C.

Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

ACTIVITIES RELATING TO NRSROs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
A. Commission Orders and Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
C.

Staff Publication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

VI. APPENDIX: SUMMARY OF STATUTORY FRAMEWORK AND RULES. . . . . . . . . . . . . . . . 47

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CHARTS
Chart 1.

Table of NRSROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Chart 2. Number of Outstanding Credit Ratings as of December 31, 2022 by
Rating Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Chart 4. Breakdown of Ratings Reported Outstanding by Rating Category as of
December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Chart 5. Breakdown of Ratings Reported Outstanding by NRSRO
as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Chart 6. Breakdown of Non-Government Securities Ratings Reported
Outstanding by NRSRO as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . 25
Chart 7. Breakdown of Government Securities Ratings Reported
Outstanding on December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Chart 8. Total Non-Government Ratings Issued by All NRSROs (2018-2022) . . . . . . . . . . . . . 27
Chart 9. Total Non-Government Ratings Issued by Medium and Small NRSROs
(2018-2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Chart 10.

Total ABS Ratings Issued by All NRSROs (2018-2022) . . . . . . . . . . . . . . . . . . . . . 28

Chart 11.

NRSRO Credit Analysts and Credit Analyst Supervisors . . . . . . . . . . . . . . . . . . . . 29

Chart 12. NRSRO Fiscal Year Revenue as a Percentage of Aggregate
Reported Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Chart 13. Rating Agency Market Shares for Total Non-Agency U.S. CMBS
Issued in 2021, 2022, and First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Chart 14. Rating Agency Market Shares for U.S. Conduit CMBS Issued in 2021,
2022, and First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Chart 15. Rating Agency Market Shares for U.S. Single-Borrower CMBS
Issued in 2021, 2022, and First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Chart 16. Rating Agency Market Shares for Agency CMBS Issued in 2021, 2022, and
First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Chart 17. Rating Agency Market Shares for U.S. ABS Issued in 2021, 2022, and
First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Chart 18. Rating Agency Market Shares for U.S. MBS Issued in 2021, 2022, and
First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Chart 19. Rating Agency Market Shares for U.S. CLOs Issued in 2021, 2022, and
First Half of 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

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

I. INTRODUCTION

T

he Staff of the U.S. Securities and Exchange
Commission (Commission) provides this
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 and Section
15E(p)(3)(C) of the Securities Exchange Act of
1934 (Exchange Act).2
Section 6 of the Rating Agency Act requires the
Commission to submit an 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 that, with respect to the year to which the
report relates:
■

■

■

1
2
3

Identifies applicants for registration as NRSROs
under Section 15E;
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.

Section 15E(p)(3)(C) requires the Commission
to make available to the public an annual report
summarizing:
■

■

■

Essential findings of all Section 15E
examinations, as deemed appropriate by the
Commission;
NRSROs’ responses to any material regulatory
deficiencies identified by the Commission; and
Whether the NRSROs have appropriately
addressed the recommendations of the
Commission contained in previous annual
reports.

This Report addresses the items specified in Section
6 of the Rating Agency Act and Section 15E(p)(3).
This is a report of the Staff and, as such, reflects
solely the Staff’s views.
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.3

Pub. L. No. 109-291, 120 Stat. 1327 (Sept. 29, 2006).
Unless otherwise noted, all section and rule references in this report are to the Exchange Act and rules under the Exchange
Act.
See “Reports and Studies” section of the OCR webpage, available at https://www.sec.gov/about/divisions-office/officecredit-ratings/reports-and-studies. Prior to 2021, OCR published two separate annual reports: an Annual Report to
Congress pursuant to Section 6 of the Rating Agency Act and a Summary Examination Report pursuant to Section 15E(p)
(3)(C) of the Exchange Act. In 2021, OCR began publishing a single annual report to present the requirements under both
Section 6 of the Rating Agency Act and Section 15E(p)(3) of the Exchange Act.

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

II. STATUS OF REGISTRANTS AND
APPLICANTS

I

n 2007, the Commission began granting registrations to credit rating agencies that applied to be
registered as an NRSRO. Section 3(a)(62) defines
a “nationally recognized 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:

As of December 31, 2023, there were ten credit
rating agencies registered as NRSROs.6 Chart
1 below lists each NRSRO registered with the
Commission as of such date, the categories of
credit ratings described in clauses (i) through (v)
of Section 3(a)(62)(A) in which each NRSRO is
registered, and the location of each NRSRO’s
principal office.7

(i) Financial institutions, brokers, or dealers;
(ii) Insurance companies;
(iii) Corporate issuers;
(iv) Issuers of asset-backed securities;4
(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.5

Solely for purposes of this Report: Fitch, Moody’s,
and S&P are categorized as “large NRSROs;”
AMB, DBRS, and KBRA are categorized as
“medium NRSROs;” and Demotech, EJR, HR,
and JCR are categorized as “small NRSROs.”
These categorizations are based on revenue.8

4
5
6
7

8

In accordance with the Exchange Act, the
Commission grants registration as an NRSRO
if it finds the requirements of Section 15E are

“Asset-backed securities” has the meaning set forth in 17 CFR 229.1101(c), as in effect on September 29, 2006 (the date of
enactment of the Rating Agency Act).
Section 3(a)(62)(A).
Section 15E(a) sets out registration procedures for a credit rating agency to voluntarily apply to be registered with the
Commission as an NRSRO.
See each NRSRO’s current Form NRSRO 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 paragraphs (e)
and (f) of Rule 17g-1, and each NRSRO must make its current Form NRSRO publicly and freely available on its website
pursuant to paragraph (i) of Rule 17g-1. Form NRSRO filings are available on the EDGAR system at https://www.sec.
gov/edgar/searchedgar/companysearch.html. 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.
Collectively, the three large NRSROs account for approximately 91.1% of the aggregate revenue reported by all NRSROs
for the 2022 fiscal year in accordance with Rule 17g-3(a)(3); the three medium NRSROs collectively account for
approximately 7.3% of such aggregate revenue; and the four small NRSROs collectively account for approximately 1.6%
of such aggregate revenue. See infra Section IV.A.1.c, Chart 12.

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3

Chart 1. Table of NRSROs
Categories of Credit
Ratings

Principal Office

A.M. Best Rating Services, Inc. (AMB)

(ii), (iii), and (iv)

U.S.

DBRS, Inc. (DBRS)

(i) through (v)

U.S.

(ii)

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, LLC (KBRA)

(i) through (v)

U.S.

Moody’s Investors Service, Inc. (Moody’s)

(i) through (v)

U.S.

S&P Global Ratings (S&P)

(i) through (v)

U.S.

NRSRO

Demotech, Inc. (Demotech)

satisfied and so long as it does not find: (1) that
the applicant does not have adequate financial and
managerial resources to produce credit ratings with
integrity, to materially comply with its procedures
and methodologies for determining credit ratings
disclosed on Form NRSRO, and to materially
comply with provisions of Section 15E related
to the prevention of the misuse of non-public
information, management of conflicts of interest,
prohibited conduct, and designation of a
compliance officer; or (2) that, if the applicant were
to be registered, its registration would be subject to
suspension or revocation.9

9
10

Section 15E(a)(2)(C).
See Section 15E(a) and Rule 17g-1; see also Form NRSRO, available at https://www.sec.gov/about/forms/formnrsro.pdf.
In addition, Section 15E(b) requires NRSROs to promptly amend Form NRSRO if any information or document provided
therein becomes materially inaccurate.
Section 3(a)(60) defines the term “credit rating,” Section 3(a)(61) defines the term “credit rating agency,” and Section
3(a)(62) defines the term “nationally recognized statistical rating organization.” For additional information about credit
ratings, see Updated Investor Bulletin: The ABCs of Credit Ratings (Oct. 12, 2017), available at https://www.sec.gov/oiea/
investor-alerts-and-bulletins/ib_creditratings.
See Section 3(a)(62)(A)(i) – (vi).

11

12

4

Applications for initial registration by a credit
rating agency and for registration by a current
NRSRO in additional rating categories are filed
on Form NRSRO.10 A credit rating agency may
choose not to apply for registration as an NRSRO,
in which case it may issue credit ratings as a
credit rating agency, but it may not issue credit
ratings as an NRSRO.11 In addition, a credit rating
agency may choose to apply for registration as
an NRSRO in one or more rating categories.12 As
noted in Chart 1 above, certain NRSROs are registered in all of the rating categories, and certain
NRSROs are registered in fewer than all of the
rating categories.

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

In calendar year 2023, no applications for initial
registration as an NRSRO, or applications for
registration by a current NRSRO in additional
rating categories, were filed with the Commission.
The SEC oversees and, as discussed below,
examines NRSROs. The Commission is prohibited

13

by statute, however, from regulating the substance
of credit ratings or the procedures and methodologies the NRSROs use to determine credit
ratings.13 Methodologies include, among other
things, the quantitative and qualitative models used
to determine credit ratings.

See Section 15E(c)(2).

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III. EXAMINATIONS AND MONITORING

A. OVERVIEW

I

n accordance with Section 15E(p)(3), the Staff
conducts examinations of each NRSRO at least
annually. 14 Generally, the purpose of these
annual examinations is to promote compliance
with applicable federal securities laws and rules by
identifying potential instances of non-compliance by
NRSROs with their statutory and regulatory obligations and recommending remedial action. Information obtained during an examination can also
inform Staff of noteworthy industry developments.
To facilitate and promote compliance by NRSROs
with their statutory and regulatory obligations, the
Staff sends each NRSRO an examination summary
letter that discusses its findings related to that
NRSRO and recommends remedial measures. When
appropriate, Staff may refer findings to the Commission’s Division of Enforcement for investigation.
Section 15E(p)(3)(B) provides that each NRSRO
examination (Section 15E examinations) shall
include a review of the following eight topic areas
(Section 15E Review Areas):
■

■

14

Whether the NRSRO conducts business in
accordance with its policies, procedures, and
rating methodologies;
Management of conflicts of interest by the
NRSRO;

■

■
■
■

■
■

Implementation of ethics policies by the
NRSRO;
Internal supervisory controls of the NRSRO;
Governance of the NRSRO;
Activities of the Designated Compliance Officer
(DCO) of the NRSRO;
Processing of complaints by the NRSRO; and
Policies of the NRSRO governing the
post-employment activities of its former staff.

This Section III discusses the annual examinations
pursuant to Section 15E(p)(3) that commenced in
late 2022 and concluded in late September 2023
(2023 Section 15E examinations).

B. RISK ASSESSMENT
The 2023 Section 15E examinations encompassed all of the statutorily required Section 15E
Review Areas. The Staff also determined areas of
emphasis and issues of focus for each examination
based upon an NRSRO-specific risk assessment
performed by the Staff, while also considering how
to limit the amount of personal data collected in
the examination process. The NRSRO-specific
risk assessments considered a number of factors,
including, but not limited to:
■
■

NRSROs’ rating activities and operations;
Staff’s findings, recommendations, and other
observations from prior examinations;

Pursuant to Section 17, the Staff can conduct examinations of NRSROs that supplement the Section 15E examinations.

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■

■

■

■
■

■

Impact of a potential or actual internal control
or compliance failure by the NRSRO;
Recent industry developments affecting
NRSROs and the asset classes in which the
NRSRO is registered;
NRSROs’ filings with the Commission and
public disclosures;
NRSROs’ self-identified weaknesses;
Relevant Tips, Complaints, and Referrals
(TCRs) received by the Commission; and
Risks identified in a risk assessment process.

Through its risk assessment process in connection
with the 2023 Section 15E examinations, the Staff
identified a number of potential risks for consideration in the NRSRO-specific risk assessments and
incorporation into the examinations, as appropriate. The risks identified include:
■

■

Effect of Higher Interest Rates: The Staff
observed that the sustained rise in interest rates
in 2022 had increased debt service payments
of highly leveraged companies, putting them
under increased financial pressure. Given the
potential impact on the creditworthiness of
such companies, the Staff identified NRSRO
surveillance of low-rated companies as an
area for examination. NRSRO surveillance
of collateralized loan obligations and
securitizations backed by consumer assets and
auto loans were also identified as potential
areas for examination, given the Staff’s view
that higher interest rates could impact the credit
quality of such issuances.
Rental Income Securitizations: Large institutions
have sharply increased their investments in
single-family rental properties in certain regions
and have securitized rental income from those

C. MONITORING
To help inform its risk assessment process and
examination program, the Staff in 2023 monitored
credit rating activity, industry trends and developments, NRSRO operational developments and
plans, and relevant capital market, economic, and
financial news and events. The Staff’s monitoring
activities include communications with NRSROs
and reviewing sources such as NRSRO publications, news reports, trade publications, academic
papers, industry conference information, and
government reports.

See Report from the Committee on Appropriations on the Financial Services and General Government Appropriations Bill,
2023, 117th Congress (June 28, 2022), available at https://www.congress.gov/117/crpt/hrpt393/CRPT-117hrpt393.pdf.

15

8

■

properties as a source of funding. The House
Committee on Appropriations commented
on transparency and rating requirements and
procedures in the rental income securitization
market that might contribute to financial
or housing price instability.15 Given these
comments, the Staff identified ratings of such
securitizations as an area for examination.
Distinguishing Analytical Tools from Models:
NRSROs must establish policies and procedures
regarding the development of and approval by
its board of directors, or a body performing a
function similar to that of a board of directors,
of the quantitative models used to determine
credit ratings. In addition to models, some
NRSROs may also use analytical tools to
perform quantitative calculations that they do
not consider to be models. The Staff identified
as areas for examination the process by which
an NRSRO distinguishes between analytical
tools and models, how NRSROs utilize
analytical tools, and how approval processes
may differ for analytical tools and models.

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

For example, the Staff gathered information on the
potential credit impacts of the unsettled commercial
real estate market. NRSROs reported that they are
actively monitoring the potential credit impacts of
higher interest rates and soft commercial real estate
demand across their rated portfolios, including
with regard to CMBS and REITs. NRSROs also
published research and commentaries regarding
commercial real estate, examples of which are
discussed in Section IV.B of this Report.
The Staff also continued to monitor NRSRO rating
activity related to crypto assets, including so-called
decentralized finance (DeFi), distributed ledger
technologies, and smart contracts. Although rating
activity in this area remains limited, one example
is S&P’s and Moody’s ratings of Coinbase Global
Inc., a crypto-asset trading platform.16 Another
example is Moody’s credit ratings of blockchainbacked bonds issued by the European Investment
Bank (EIB); Moody’s view is that the ultimate credit
risk remains with EIB because they are obligated
to make payments on the bonds independent
of any risk introduced by the new technology
features.17 Additionally, both S&P and Moody’s

16

17

18

19

20

rate MicroStrategy Inc., a software company with
significant Bitcoin holdings.18
In 2023, the Staff also 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.19 Each college engaged in periodic discussions during 2023 regarding supervisory activities
related to the credit rating agencies. The Staff also
conducted additional discussions with foreign
regulators, as appropriate.

D. 2023 SECTION 15E(p)(3)
EXAMINATIONS
1. Overview
The 2023 Section 15E examinations generally
focused on the NRSROs’ activities for the period
covering January 1, 2022, through December 31,
2022 (the Review Period). The examinations also
reviewed certain activities or credit rating actions
from outside the Review Period, as appropriate.20

S&P’s and Moody’s current ratings of Coinbase may be found, respectively, at the following links: https://disclosure.
spglobal.com/ratings/en/regulatory/org-details/sectorCode/FI/entityId/690877 and https://www.moodys.com/credit-ratings/
Coinbase-Global-Inc-credit-rating-867853012/summary.
See Moody’s rates EIB’s first-ever green digital bond Aaa, Moody’s (Jul 3, 2023) available at https://www.moodys.com/
research/Moodys-rates-EIBs-first-ever-green-digital-bond-Aaa-Rating-Action--PR_477956; see also Moody’s assigns Aaa
rating to EIB’s third digital bond, Moody’s (Feb 28, 2023) available at https://www.moodys.com/research/Moodys-assignsAaa-rating-to-EIBs-third-digital-bond-Rating-Action--PR_473857; see also Moody’s assigns Aaa rating to EIB’s second
digital bond, Moody’s (Nov 29, 2022) available at https://www.moodys.com/research/Moodys-assigns-Aaa-rating-to-EIBssecond-digital-bond-Rating-Action--PR_471665.
S&P’s and Moody’s current ratings of MicroStrategy Inc. may be found, respectively, at the following links: https://
disclosure.spglobal.com/ratings/en/regulatory/org-details/sectorCode/CORP/entityId/683025 and https://www.moodys.
com/credit-ratings/MicroStrategy-Incorporated-credit-rating-823373715/summary.
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 college for S&P and the Staff represents the SEC
in this regard. The European Securities and Markets Authority serves as chair of the college for Fitch, and the Financial
Conduct Authority serves as chair of the college for Moody’s.
For example, the Staff may review information relating to TCRs in a current examination, even if the referenced activities
occurred outside of the Review Period.

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The 2023 Section 15E examinations included a
review of the Section 15E Review Areas and examination of each NRSRO’s compliance with Section
15E and Rules 17g-1 through 17g-10. For example,
the Staff reviewed a sample of rating actions of
each NRSRO in certain asset classes for which it
is registered and for certain issuers and obligors
to determine whether the NRSRO operated in
accordance with its policies, procedures, and rating
methodologies. The Staff also reviewed rating
files and documentation to evaluate whether each
NRSRO adhered to recordkeeping requirements.21
2. Terms Used in This Report
This Report contains a summary of, respectively,
the essential findings of the Staff’s annual examinations, the NRSROs’ responses to any material
regulatory deficiencies, and whether the NRSROs
have appropriately addressed the recommendations
contained in previous reports.22
For purposes of this Report, the Staff considers an
“essential finding” to be any instance identified
by the Staff of apparent non-compliance by an
NRSRO with the federal securities laws or related
Commission rules applicable to NRSROs, except
those instances attributable to a non-recurring
and non-significant clerical or ministerial error or
omission. The essential findings described in this
Report reflect the Staff’s conclusions following
examination of the NRSROs. The essential findings
are not findings or conclusions of the Commission
and have not been subject to adjudication.

21

22

10

For purposes of this Report, the Staff considers
“material regulatory deficiencies” to be essential
findings that involve:
■

■

Conduct or a deficiency that could undermine
the quality of a credit rating or impair the
objectivity of an NRSRO’s credit rating process;
or
Conduct that may be inconsistent with the antifraud provisions of the federal securities laws.

The Staff’s determination that an NRSRO appropriately addressed a recommendation does not
constitute its endorsement of that NRSRO or its
policies, procedures, internal controls, or operations. In a future examination, the Staff may
reevaluate the NRSRO’s response to recommendations that it previously deemed to be appropriately
addressed by, for example, assessing whether the
NRSRO fully implemented remedial measures
and whether those remedial measures appear
to be effective. The Staff may also review and
make recommendations concerning the NRSRO’s
policies, procedures, internal controls, or operations related to the general subject matter of a
recommendation that it previously deemed to be
appropriately addressed.
The Staff’s assessment of whether an NRSRO has
appropriately addressed a recommendation depends
on the specific facts and circumstances, including,
but not limited to, the promptness of the NRSRO’s
response, the severity of the conduct at issue, and
whether the remedial action undertaken by the

To select rating actions and rating files to review, the Staff used a risk-based sampling process that is consistent with its
overall risk assessment approach described in this Report. The Staff also considered factors including, but not limited
to, the size of the rated asset class in the financial markets and the NRSRO’s business, the NRSRO’s activity in the
rated asset class, the likelihood of impact on investors if a rating was not determined in accordance with the NRSRO’s
methodologies and procedures, news reports and developments concerning the NRSROs or particular asset classes, TCRs,
and information the Staff learned during examinations.
See Section 15E(p)(3)(C)(i)-(iii). In this Report, essential findings are organized by NRSRO within the applicable large,
medium, and small groups.

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

NRSRO is expected to fully resolve the Staff’s
concerns. In addition, the determination of whether
an NRSRO appropriately addressed a recommendation reflects solely the Staff’s view and does not
necessarily reflect the views of the Commission.
3. Summary of Essential Findings and
Responses to Material Regulatory
Deficiencies
For purposes of the Report, the Staff grouped
the essential findings by each large NRSRO,
medium NRSRO, and small NRSRO in a random
ordering.23
a. Large NRSRO #1

(1) The NRSRO’s policies and procedures
did not require reviews in connection with
the departure of employees holding certain
positions, notwithstanding that individuals
in such positions are eligible to participate in
rating committees. The Staff recommended that
the NRSRO revise or supplement its policies
and procedures related to post-employment
review requirements to ensure that such
reviews are conducted for all applicable former
employees who participated in determining
credit ratings, as required by Section 15E(h)
(4)(A). The Staff also recommended that the
NRSRO identify post-employment reviews that
should have been conducted but were not and
conduct those reviews.
(2) The Staff reviewed the underlying information with respect to certain rating transitions
disclosed on Exhibit 1 to Form NRSRO and
observed a number of instances where, contrary
to the instructions to the form, multiple ratings
for a single entity were included in the under-

23

lying information. The Staff recommended
that the NRSRO modify its approach for
determining which credit ratings to include in its
performance measurement statistics in accordance with the instructions to Form NRSRO.
b. Large NRSRO #2

(1) The NRSRO did not publish an information disclosure form for rating actions with
respect to a certain type of private credit rating.
The Staff recommended that the NRSRO
provide information disclosure forms for such
rating actions to the same persons who can
receive or access ratings of this type in accordance with the requirements of Rule 17g-7(a).
The Staff also recommended that the NRSRO
revise its policies and procedures to reflect the
requirement to publish information disclosure
forms with respect to such ratings.
c. Large NRSRO #3

(1) The NRSRO did not appear to require
a sufficient record to be made and retained
with respect to certain determinations made
during surveillance reviews. The Staff reviewed
documentation related to a surveillance review
but, due to the lack of a documented rationale,
was not able to determine whether the decision
that the rating was at an appropriate rating
level was made in accordance with the applicable methodology. The Staff recommended
that the NRSRO improve its internal control
structure required by Section 15E(c)(3)(A),
including by making and retaining appropriate
documentation of qualitative considerations, to
allow for after-the-fact verification that surveillance decisions were consistent with the applicable methodologies.

The annual examination of one of the small NRSROs did not identify any essential findings.

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11

(2) With regard to two ratings, a member
of an analytical team who chaired the rating
committees exerted pressure on other analytical
team members and rating committee participants to assign higher ratings. Records of
statements made by this individual reflect a
focus on gaining business and, with respect
to one of the issuers, a desire to make accommodations to please the issuer. Contrary to
the NRSRO’s policies and procedures, this
individual participated in sales and marketing
activities and appears to have been influenced
by sales and marketing considerations. The
individual also participated in the determination of the credit ratings by acting as chair
of the rating committees, and, as such, the
NRSRO appeared to issue and maintain credit
ratings notwithstanding the existence of a
prohibited conflict of interest. The Staff recommended that, consistent with the requirements
of Section 15E(h) and Rule 17g-5(c)(8), the
NRSRO enhance enforcement of its policies
and procedures to prevent persons within
the NRSRO who participate in determining
credit ratings from also participating in sales
or marketing or being influenced by sales or
marketing considerations.
The Staff identified this essential finding as a
material regulatory deficiency.
In its response, the NRSRO noted that it
conducted an internal investigation of the
matter after an employee had anonymously
reported the actions of the individual in
question by means of the NRSRO’s dedicated
reporting hotline. The NRSRO also noted
that, following its investigation, it took
remedial action by terminating the individual’s
employment and that it subsequently selfreported the matter to the Staff. In addition,
based on its internal investigation and an

12

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

internal independent credit review, the NRSRO
concluded that each of the two credit ratings
was at an appropriate rating level in accordance
with the applicable methodologies and had
not been affected by the individual’s conduct.
Although the NRSRO stated that it believes its
applicable procedures and controls are robust
and functioning well, the NRSRO indicated
that it is reviewing its policies, procedures, and
controls to consider if any enhancements are
warranted to help prevent such conduct from
occurring in the future.
(3) In some instances, analysts inadvertently
sent emails with confidential pending rating
action information to persons outside the
NRSRO. Contrary to the NRSRO’s policies
and procedures, in most of the instances, the
NRSRO’s compliance department was not
promptly notified of the inappropriate dissemination of material non-public information. The
Staff recommended that the NRSRO enforce its
policies and procedures to prevent the misuse
of material, nonpublic information, as required
by Section 15E(g)(1), and consider whether
additional controls are needed. The Staff also
recommended that the NRSRO take measures
to ensure that NRSRO personnel understand
their obligation to promptly report to the
NRSRO’s compliance department instances
where non-public information has been
inappropriately disclosed.
(4) In assigning certain credit ratings, the
NRSRO used a model that contained both
prepopulated data fields and data fields that
required the analyst to enter appropriate values.
The NRSRO assigned certain ratings that were
higher than they should have been because a
prepopulated value in a model was incorrect
for the issuer and the analyst did not recognize
or correct the error prior to determining

the rating. The Staff recommended that the
NRSRO enhance its internal control structure
required by Section 15E(c)(3)(A) as it pertains to
adherence to its methodologies and the calculation of certain metrics.
(5) The NRSRO did not disclose complete
and correct credit rating histories in its Rule
17g-7(b) disclosures. For a particular month,
the NRSRO posted a disclosure that did not
include a significant number of withdrawn
credit ratings that were required to be disclosed.
For a different month, the subclass designation
of a significant number of ratings was misclassified, and the file contained duplications of
some rating information. Further, the NRSRO
did not include a particular rating in the
NRSRO’s credit rating history disclosures for
approximately 18 months. The Staff recommended that the NRSRO implement appropriate procedures or controls to ensure the
accurate creation and maintenance of its credit
rating history disclosures.
d. Medium NRSRO #1

(1) In several instances, the NRSRO provided
inaccurate or incomplete records in response to
requests from the Staff. The Staff recommended
that the NRSRO implement appropriate
controls to ensure that it maintains accurate
records and promptly provides complete copies
of all relevant documents in its productions to
the Staff, as required by Rule 17g-2(f).
(2) Some information disclosure forms
contained a link purporting to provide the
historical performance disclosure required by
Rule 17g-7(a). However, clicking on the link
did not retrieve the required information. The
Staff recommended that the NRSRO ensure
that its information disclosure forms contain the
required information for all rating actions.

e. Medium NRSRO #2

(1) The NRSRO did not appear to require
a sufficient record to be made and retained
with respect to certain qualitative adjustments
made by analysts in the course of conducting
surveillance reviews. The Staff reviewed
documentation related to a surveillance
review but, due to the lack of a documented
rationale, was not able to determine whether
certain adjustments were made in accordance
with the applicable methodology. The Staff
recommended that the NRSRO improve its
internal control structure required by Section
15E(c)(3)(A), including by making and retaining
appropriate documentation of qualitative
considerations, to allow for after-the-fact
verification that surveillance decisions were
consistent with the applicable methodologies.
(2) Although a process for users of credit
ratings to submit complaints anonymously
exists at this NRSRO, it is not apparent
or intuitive how to do so. The difficulty in
submitting complaints anonymously may
discourage users of credit ratings from communicating bona fide complaints to the NRSRO.
The Staff recommended that the NRSRO
establish effective procedures for the receipt,
retention, and treatment of confidential,
anonymous complaints by users of credit
ratings, consistent with the requirements of
Section 15E(j)(3).
(3) The Staff reviewed the underlying information with respect to certain rating transitions
disclosed on Exhibit 1 to Form NRSRO and
observed three errors inconsistent with the
instructions to the form—the inclusion of a
withdrawn rating, the inclusion of an indicative
rating, and the inclusion of a debt rating when
an obligor rating was available. The Staff
recommended that the NRSRO ensure that the

S TA F F R E P O R T

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13

performance measurement statistics disclosed
in Exhibit 1 to Form NRSRO are accurate and
consistent with the instructions to the form.
f. Medium NRSRO #3

(1) The NRSRO’s policy regarding securities
holdings generally requires employees to
report their holdings to the compliance
department. Certain accounts, however, were
excluded from this requirement. Since the
exclusion was not limited to indirect ownership
interests, the NRSRO’s policy did not appear
to be reasonably designed, given the lack of
monitoring of holdings that could result in a
conflict of interest under Rule 17g-5(b)(6) or
Rule 17g-5(c)(2). The Staff recommended that,
consistent with the requirements of Section
15E(h)(1), the NRSRO establish, maintain,
and enforce written policies and procedures
reasonably designed to address and manage
conflicts of interest with respect to directly
owned securities held in the excluded accounts
and review past account statements for such
accounts to identify any instances where a credit
analyst participated in determining a credit
rating or had responsibility for approving a
rating while directly owning securities of the
rated entity.
(2) The NRSRO did not enforce its policies
and procedures regarding conflict of interest
reviews following the departure of employees
who participate in determining credit ratings
and the submission of employment transition
reports to the Commission with respect to
former employees who obtain employment at
an entity rated by the NRSRO. In one instance,
the NRSRO did not conduct a conflict of
interest review within 30 days of learning that
a former employee had joined a rated entity,
as required by its policies and procedures; and

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

instead conducted the review eight months
later. In another instance, although the NRSRO
conducted the conflict of interest review in
accordance with its policies and procedures,
it did not submit an employment transition
report to the Commission for over nine months.
In addition, the NRSRO’s written procedures
did not require monitoring of all departed
employees for five years as necessary to comply
with the employment transition reporting
requirements of Section 15E(h)(5)(A). The Staff
recommended that the NRSRO conduct conflict
of interest reviews for departed employees in
accordance with its policies and procedures
and as required by Section 15E(h)(4)(A). The
Staff also recommended that the NRSRO
evaluate and revise its policies and procedures
for submitting employment transition reports to
the Commission to ensure compliance with the
requirements of Section 15E(h)(5)(A).
f. Small NRSRO #1

(1) The NRSRO maintained a system to
measure credit rating analyst productivity based
on the number of rating actions an analyst
was able to complete on a weekly basis. With
respect to the initial determination of a credit
rating, an analyst only received credit under the
system if the credit rating was actually issued. In
the Staff’s view, this system established incentives for analysts to produce ratings as quickly
as possible, without regard to rating quality,
and the presence of such incentives made it
difficult or impossible for the NRSRO to
manage conflicts of interest related to how the
NRSRO is paid for credit ratings. Furthermore,
the system appeared to be designed to achieve
sales and marketing objectives and to result
in analytical employees being influenced by
sales and marketing considerations. The Staff
recommended that the NRSRO eliminate

performance measures for analysts that
promote sales and marketing considerations
and exacerbate conflicts of interest. The Staff
also recommended that the NRSRO maintain
adequate resources and utilize those resources to
implement and enforce policies, procedures, and
controls necessary to consistently produce credit
ratings with integrity.
The Staff identified this essential finding as a
material regulatory deficiency.
In its response, the NRSRO stated its belief
that its conflict-related policies and procedures,
training, and other controls provide a high
measure of assurance regarding the NRSRO’s
compliance with Rule 17g-5. The NRSRO
noted a lack of adverse responses to an annual
survey of analysts regarding the presence of
conflicts of interest. Nonetheless, the NRSRO
indicated that it eliminated the productivity
measurement system upon receipt of the Staff’s
finding and recommendation and that it plans
to significantly augment the level of oversight
of the firm’s compensation and promotion
policies and practices by the NRSRO’s board
of directors. The NRSRO also noted that it
plans to perform a review of the adequacy of
financial and managerial resources available to
consistently produce ratings with integrity and
will augment such resources as necessary and
appropriate in accordance with the results of
the review.
(2) In one instance, a senior manager of the
NRSRO prevented the designated compliance
officer from enforcing a policy and procedure
regarding permitted attendance at a joint
meeting of analytical and marketing personnel
with clients. The senior manager’s interference
with the designated compliance officer’s
enforcement of the policy appeared to inhibit

the designated compliance officer’s ability to
fulfill their Section 15E(j)(1) responsibility to
administer conflicts of interest policies and
procedures and ensure compliance with the
securities laws. The Staff recommended that
the NRSRO, as required by Section 15E(h)
(1), enforce its conflicts of interest policies
and procedures and, to facilitate compliance,
provide appropriate notice and training on
those policies to NRSRO personnel and institute
appropriate discipline with regard to personnel
who do not follow such policies.
The Staff identified this essential finding as a
material regulatory deficiency.
In its response, the NRSRO stated that it plans
to conduct a training session on its procedure
regarding joint analytical and commercial
meetings and calls and remind its employees by
e-mail of the importance of adhering to such
procedure. The NRSRO also indicated that it
will perform a review of its discipline procedures, with a view toward strengthening disciplinary measures taken in response to intentional
noncompliance with compliance obligations.
(3) The NRSRO did not appear to adhere to
the policies and procedures it adopted pursuant
to Section 15E(j)(3) to establish procedures
for the receipt, retention, and treatment of
complaints regarding credit ratings, models,
and methodologies. In one instance, an analyst
notified management about errors related to
the incorporation of new information into a
model used in the rating process. Although
the analyst’s emails appeared to constitute a
complaint under the NRSRO’s definition of that
term, the NRSRO did not follow its policies
and procedures regarding the receipt, retention,
and treatment of complaints. The Staff
recommended that the NRSRO adhere to its

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complaints policies and procedures and ensure
that its employees understand what types of
communications constitute a complaint under
such policies and procedures.
(4) In 2022, the NRSRO did not conduct
surveillance reviews for a significant number
of ratings within the time frame required by
its policies and procedures, demonstrating that
the NRSRO’s internal controls surrounding
adherence to its policies and procedures for
determining credit ratings were not effective.
The Staff recommended that the NRSRO
implement effective controls promoting
adherence to the surveillance review requirements set forth in its policies and procedures, as
required by Section 15E(c)(3)(A).
(5) The NRSRO’s policy regarding securities
holdings generally requires employees to report
their holdings to the compliance department.
Certain accounts, however, were excluded
from this requirement. Since the exclusion was
not limited to indirect ownership interests, the
NRSRO’s policy did not appear to be reasonably
designed, given the lack of monitoring of
holdings that could result in a conflict of interest
under Rule 17g-5(b)(6) or Rule 17g-5(c)(2). The
Staff recommended that, consistent with the
requirements of Section 15E(h)(1), the NRSRO
establish, maintain, and enforce written policies
and procedures reasonably designed to address
and manage conflicts of interest with respect to
directly owned securities held in the excluded
accounts and review past account statements for
such accounts to identify any instances where
a credit analyst participated in determining a
credit rating or had responsibility for approving
a rating while directly owning securities of the
rated entity.

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i. Small NRSRO #2

(1) The Staff observed an instance where
the NRSRO changed its rating analysis at
the behest of a client in order to provide the
client with a higher rating that was determined
inconsistently with the NRSRO’s policies,
procedures, and methodologies for determining
credit ratings. The NRSRO’s internal control
structure was ineffective in identifying inconsistencies between the client’s suggestion and the
NRSRO’s methodology. Specifically, oversight
by the rating committee appears to have been
ineffective in this case. Based on a review
of committee minutes and discussions with
committee members, the Staff concluded that
the committee did not appropriately scrutinize
the change in analytical approach. Further,
the circumstances under which the NRSRO
changed its rating analysis demonstrate that
analytical personnel were influenced by sales
and marketing considerations, and, as such, the
NRSRO issued and maintained the credit rating
notwithstanding the existence of a prohibited
conflict of interest. The Staff recommended
that the NRSRO enhance its internal control
structure required by Section 15E(c)(3)(A) and
consider subjecting rating outcomes changed
at a client’s request to enhanced scrutiny. The
Staff also recommended that the NRSRO
review and, if appropriate, revise, any credit
ratings that were determined using a similar
analytical approach and, more broadly, any
credit ratings that were determined using an
analytical approach recommended by a client.
The Staff identified this essential finding as a
material regulatory deficiency.
In its response, the NRSRO stated that it plans
to modify the relevant methodology to clarify
the NRSRO’s analytical approach in situations

such as those underlying the Staff’s finding.
The NRSRO also indicated that it will enhance
controls regarding the evaluation of additional
information provided by an entity after a
rating has been determined. The enhanced
controls identified by the NRSRO include
requiring documentation related to the analysis
of the information and memorializing related
rating committee discussions. The NRSRO
further stated that it will conduct a review
of outstanding credit ratings in connection
with the implementation of its contemplated
methodology changes and that it will prepare a
special report for discussion by its methodology
development committee.
(2) The NRSRO did not appear to have
effective internal controls to ensure that models
were adequately evaluated and validated prior
to use. With respect to one model, although a
review was conducted and the model validated,
such process did not discover apparent inconsistencies between the model and the governing
methodology. The Staff recommended that,
consistent with the requirements of Section
15E(c)(3)(A), the NRSRO implement controls
reasonably designed to ensure that newly
developed or updated models are adequately
evaluated and validated prior to being put
in use. The Staff also recommended that the
NRSRO conduct a review of and, where appropriate, revise credit ratings that were determined
using financial metrics that were calculated in a
manner inconsistent with the methodology.
The Staff identified this essential finding as a
material regulatory deficiency.
In its response, the NRSRO expressed
disagreement with the Staff’s conclusion that

the model was inconsistent with the governing
methodology and indicated that it plans to
amend the methodology to provide clarity
regarding its intended analytical approach.
The NRSRO also indicated that it plans to
document detailed minutes of board of directors
discussions in connection with the approval of
methodologies and models.
(3) The Staff observed an instance where the
NRSRO did not retain a record of a model
output that determined a model-implied rating
used in the rating analysis. The Staff recommended that the NRSRO retain all internal
records used to form the basis of a credit rating,
as required by Rule 17g-2.
(4) The NRSRO made disclosures that
implied it was registered as an NRSRO in
certain asset classes in which it was not registered. In light of the Section 15E(f)(2) prohibition on a credit rating agency stating that it
is an NRSRO when it is not registered as such,
the Staff recommended that the NRSRO revise
its existing disclosures and public filings, so
they do not contain misleading information
regarding the classes of credit ratings in which
the NRSRO is registered.
(5) In certain instances, analysts used a
messaging application to conduct analytical
discussions pertaining to the determination of
credit ratings. However, the NRSRO had limited
access to message histories and, as a result, did
not retain the communications for three years, as
required by Rule 17g-2(c). Further, the NRSRO
did not have policies and procedures governing
the use of the messaging application, and the
NRSRO’s procedures governing document
retention did not address communications on

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the messaging application. The Staff recommended that the NRSRO retain all external and
internal communications relating to initiating,
determining, maintaining, monitoring, changing,
or withdrawing a credit rating, as required by
Rule 17g-2(b)(7), and establish appropriate
controls to monitor communications to ensure
compliance with its policies and procedures and
applicable rules and statutes.
(6) The NRSRO published an information
disclosure form that did not include all the
information required to be disclosed under Rule
17g-7(a). Specifically, the NRSRO omitted
from the form a disclosure regarding payment
during the most recently ended fiscal year for
non-credit rating services by a person that paid
the NRSRO to determine a credit rating. The
Staff recommended that, when applicable, the
NRSRO state in the information disclosure
form that it was also paid for services other than
determining credit ratings by a person that paid
it to determine the credit ratings.
(7) The Staff reviewed the underlying information with respect to certain rating transitions
disclosed on Exhibit 1 to Form NRSRO and
observed several instances where, contrary to
the instructions to the form, multiple ratings for
a single entity were included in Exhibit 1. The
NRSRO indicated to Staff that it includes all
credit ratings in its performance measurement
statistics. The Staff recommended that the
NRSRO modify its approach for determining
the credit ratings to include in its performance
measurement statistics in accordance with the
instructions to Form NRSRO.

24

18

j. Small NRSRO #3

(1) The Staff identified instances where the
NRSRO did not appear to store documents
containing confidential information in a manner
that would prevent unauthorized access, as
required by the NRSRO’s policies and procedures. In addition, the NRSRO’s policies and
procedures appeared to lack sufficient guidance
regarding the handling of physical documents,
creating the potential for inappropriate dissemination of material, non-public information and
exposing analytical staff to sales and marketing
considerations. The Staff recommended that
the NRSRO establish, maintain, and enforce
policies and procedures reasonably designed
to safeguard physical documents to prevent
the misuse of material non-public information
and to prevent analytical staff from being
influenced by sales or marketing considerations,
as required by Section 15E(g)(1) and Section
15E(h)(1), respectively.
Additionally, one of the NRSROs appeared to not
comply with certain requirements in a Commission
order. The Staff recommended that the NRSRO
comply with these requirements.
In total, the Staff communicated 29 essential
findings to the NRSROs at the conclusion of the
2023 Section 15E examinations and identified five
of these essential findings as material regulatory
deficiencies. The essential findings can be grouped
thematically as follows:
■

nine related to issues addressing or managing
conflicts of interest, implicating Sections 15E(h)
(1), (4) and (5), and Rule 17g-5;24

One of these findings also implicated material, non-public information and another implicated internal controls. Each such
finding is double counted within the list as a result.

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■

■

■

■

■

■

eight related to disclosure or reporting issues,
implicating Section 15E(f)(2), Rule 17g-7(a),
Rule 17g-7(b), and Form NRSRO;
six related to internal control issues, implicating
Section 15E(c)(3)(A);25
three related to the retention and/or production
of records, implicating Rule 17g-2;
two related to issues regarding the prevention
of misuse of material, non-public information,
implicating Section 15E(g)(1);26
two related to procedures for the receipt,
retention, and treatment of complaints,
implicating Section 15E(j)(3); and
one related to compliance with a prior
Commission order.

4. Responses to Recommendations from
the 2022 Section 15E Examinations
To assess whether NRSROs appropriately
addressed recommendations from the 2022
Section 15E examinations, the Staff reviewed each
NRSRO’s written response describing its planned
remedial measures, participated in calls with
each NRSRO to discuss its written response, and
requested additional documentation, as appropriate. The Staff also continued to assess remedial
measures taken to address recommendations
from prior Section 15E examinations that had not
previously been determined to have been appropriately addressed.
During the 2023 Section 15E examinations, the
Staff assessed each NRSRO’s progress in implementing remedial measures such as establishing
new or enhancing existing policies or procedures
or internal controls, or adding personnel and
other resources in areas such as compliance,

25
26

information technology, or analytics. The Staff
takes into account that NRSROs may not be able
to fully implement remedial measures and/or that
the Staff may not be able to fully assess the effectiveness of these measures during the 2023 Section
15E examinations.
The Staff determined all recommendations from
the 2022 Section 15E examinations and, to the
extent they had not previously been determined
to have been appropriately addressed, prior
Section 15E examinations, have been appropriately addressed, except as noted below. NRSROs
generally addressed the recommendations from the
2022 Section 15E examinations by taking remedial
measures such as adopting new or enhancing
existing policies or procedures, internal controls,
or systems and processes, and by adding personnel
and other resources.
In one instance, the Staff determined that a small
NRSRO had attempted certain remedial efforts,
but that such efforts did not appropriately address
the corresponding recommendation. In 2022, the
Staff found that the small NRSRO did not appear
to acquire and analyze all material analytical
facts when determining a credit rating. The Staff
recommended that the NRSRO enhance its
internal controls governing the implementation
of and adherence to its policies, procedures, and
methodologies for determining credit ratings as
they pertain to data quality control, transaction
vetting, and acquisition of information about its
issuers. The Staff determined that the NRSRO did
not appropriately address the 2022 recommendation because the NRSRO’s remediation did not
enhance its internal controls around data quality,

One of these findings also implicated conflicts of interest. This finding is double counted within the list as a result.
One of these findings also implicated conflicts of interest. This finding is double counted within the list as a result.

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vetting new transactions, or acquiring information
about its issuers in a way that would prevent
future ratings from being issued despite a lack of
consideration and understanding of all material
analytical facts.
In another instance, the Staff determined that a
small NRSRO had completed its remedial efforts,
but that such efforts did not appropriately address
the corresponding recommendation. In 2022, the
Staff found that several information disclosure
forms published by the small NRSRO did not

20

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

appear to include disclosures required under Rule
17g-7(a). The Staff recommended that the NRSRO
ensure that its information disclosure forms contain
all required disclosures. While the Staff observed
in the 2023 examination that the NRSRO made
efforts to address the previous recommendation,
the Staff determined that the NRSRO did not
appropriately address the 2022 recommendation
because the Staff identified a continued failure to
disclose one of the required items that was the
subject of the 2022 finding.

IV. STATE OF COMPETITION,
TRANSPARENCY, AND CONFLICTS
OF INTEREST

A. COMPETITION
1. Select NRSRO Statistics
ections IV.A.1.a through 1.c 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 large NRSROs
continue to account for the highest percentages of
outstanding ratings, it also shows that the small
and medium NRSROs continue to compete with
the large NRSROs in certain rating categories. For
instance, the information shows that AMB has
the greatest number of ratings outstanding in the
insurance category and that DBRS and KBRA have
maintained a meaningful ratings share in the assetbacked securities category.27

S

year, in each rating category for which it is registered.28 This information, for the calendar year
ending December 31, 2022, is summarized in
Charts 2 through 10 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:
■

■

■

a. NRSRO Credit Ratings Outstanding

Each NRSRO annually reports not later than
March 31st the number of credit ratings
outstanding, as of the end of the preceding calendar

27

28

■

Chart 2 depicts the number of credit ratings each
NRSRO had outstanding, as of December 31,
2022, in each rating category for which it was
registered.
Chart 3 depicts the percentage of each NRSRO’s
outstanding credit ratings of the total credit
ratings outstanding in each category and overall.
Chart 4 illustrates the relative size of each rating
category based on the aggregate number of
ratings reported outstanding by all NRSROs.
Chart 5 illustrates the percentage of ratings
each NRSRO had outstanding across all rating
categories.

As discussed in Section IV.A.2 of this Report, information available on the websites of Commercial Mortgage Alert and
Asset-Backed Alert also shows that DBRS and KBRA have achieved significant market shares in specific asset-backed
securities rating subcategories over the past few years.
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.

S TA F F R E P O R T

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21

■

■

■

■

■

Chart 6 illustrates the percentage of ratings
each NRSRO had outstanding across all
rating categories other than the government
securities category.
Chart 7 depicts the percentage of ratings each
NRSRO had outstanding in the government
securities category.
Chart 8 depicts the change in the number of
non-government ratings outstanding for each
NRSRO over the prior five years.
Chart 9 depicts the change in the number of
non-government ratings outstanding for each
small and medium NRSRO over the prior five
years.
Chart 10 depicts the change in the number of
asset-backed securities ratings outstanding for
each NRSRO over the prior five years.

While comparing the number of ratings outstanding
among NRSROs provides a cumulative view on
the state of competition over time,29 comparing
the number of ratings issued by such NRSROs
in a given period provides a more current picture
of competition among NRSROs. Consequently,
the information described in Charts 8 through 10
(which show changes in ratings outstanding over
a five-year period) may provide an indication of
how NRSROs have been competing in recent years.
Additionally, the information described in Section
IV.A.2 of this Report (relating to recent market
share developments in the asset-backed securities

29
30
31
32

22

rating category), which provides information about
ratings issued each year since 2021, may provide
additional insight regarding the current competitive
landscape among the NRSROs 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-categories.30 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.31
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.32
Chart 2 provides the number of outstanding
credit ratings reported by each NRSRO in its
annual certification for the calendar year ending
December 31, 2022, in each of the five rating
categories identified in Section 3(a)(62)(A) for

The ratings counts disclosed on Item 7A of Form NRSRO include outstanding credit ratings, regardless of when they were
issued. As such, they reflect the rating activity of NRSROs over a period of years.
For example, AMB has traditionally focused on rating insurance companies and their affiliates.
An NRSRO identifies its credit rating affiliates on Item 3 of Form NRSRO.
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 rating count disclosures are consistent across NRSROs. See Nationally Recognized
Statistical Rating Organizations, Release No. 34-72936 (Aug. 27, 2014), 79 FR 55078, 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 with respect to Item 7 of Form NRSRO).

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

Chart 2. Number of Outstanding Credit Ratings as of December 31, 2022, by Rating Category
Financial
Institutions

Insurance
Companies

Corporate
Issuers

AssetBacked
Securities

Government
Securities

Total
Ratings

Year-Over-Year
Change in Total
Ratings
(2021 to 2022)

AMB

N/R

7,373

979

7

N/R

8,359

1.10%

DBRS

8,179

190

2,515

18,712

33,009

62,605

1.66%

Demotech

N/R

439

N/R

N/R

N/R

439

N/A

EJR

6,020

626

8,673

N/R

N/R

15,319

8.75%

Fitch

33,890

3,219

20,485

34,091

170,291

261,976

-2.50%

HR

810

N/R

597

N/R

452

1,859

3.16%

JCR

923

99

3,296

N/R

369

4,687

3.72%

KBRA

1,880

219

527

21,830

9,898

34,354

13.92%

Moody’s

35,643

2,702

32,554

51,826

548,837

671,562

-1.65%

S&P

56,773

6,924

55,009

37,338

908,740

1,064,784

-2.31%

Total

144,118

21,791

124,635

163,804

1,671,596

2,125,944

-1.69%

NRSRO

N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date.
As Demotech was not registered as an NRSRO in 2021, year-over-year data is not available.
Percentages have been rounded to the nearest one-hundredth of one percent.
Sources: NRSRO annual certifications for the 2021 and 2022 calendar years, 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, 2022
Financial
Institutions

Insurance
Companies

Corporate
Issuers

AssetBacked
Securities

Government
Securities

Total
Ratings

Percentage Point
Change in Total Ratings
from 2021 to 2022

AMB

N/R

33.84%

0.79%

<0.01%

N/R

0.39%

0.01%

DBRS

5.68%

0.87%

2.02%

11.42%

1.97%

2.94%

0.10%

Demotech

N/R

2.01%

N/R

N/R

N/R

0.02%

N/A

EJR

4.18%

2.87%

6.96%

N/R

N/R

0.72%

0.07%

Fitch

23.52%

14.77%

16.44%

20.81%

10.19%

12.33%

-0.10%

HR

0.56%

N/R

0.48%

N/R

0.03%

0.09%

<0.01%

JCR

0.64%

0.45%

2.64%

N/R

0.02%

0.22%

0.01%

KBRA

1.30%

1.01%

0.42%

13.33%

0.59%

1.62%

0.22%

Moody’s

24.73%

12.40%

26.12%

31.64%

32.83%

31.59%

0.01%

S&P

39.39%

31.77%

44.14%

22.79%

54.36%

50.08%

-0.32%

NRSRO

N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date.
As Demotech was not registered as an NRSRO in 2021, year-over-year data is not available.
Percentages have been rounded to the nearest one-hundredth of one percent.
Sources: NRSRO annual certifications for the 2021 and 2022 calendar years, Item 7A on Form NRSRO.

S TA F F R E P O R T

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23

which the NRSRO was registered as of December
31, 2022, as applicable, as well as the percentage
change in total ratings for each NRSRO from 2021
to 2022. 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, 2022, as well as the percentage increase or
decrease in total ratings from 2021 to 2022.33
The large NRSROs accounted for 94.0% of
all the ratings outstanding as of December 31,
2022—slightly lower than their 94.4% share as of
December 31, 2021.34

Chart 4. Breakdown of Ratings Reported
Outstanding by Rating Category as of
December 31, 2022

7.7%

6.8%
78.6%

5.9%

1.0%

Government Securities 78.6%
Asset-Backed Securities 7.7%

Charts 2 and 3 also show that AMB, a medium
NRSRO, had the most credit ratings outstanding
in the insurance category. In each of the past nine
years, AMB reported that it had the most credit
ratings outstanding in the insurance category.35
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, 2022.
As illustrated by Chart 4, the largest proportion
of the aggregate credit ratings reported to be

33

34
35

24

Financial Institutions 6.8%
Corporate Issuers 5.9%
Insurance Companies 1.0%

Percentages have been rounded to the nearest
one-tenth of one percent.
Sources: NRSRO annual certifications for the 2022
calendar year, Item 7A on Form NRSRO.

outstanding were in the government securities
category, which may be attributable to the large
number of government bond issuers (e.g., issuers
of municipal securities) and their multiple debt
offerings. The government securities category
accounted for 78.6% of the total number of

For example, according to Chart 2, AMB reported that it had 7,373 insurance company credit ratings, and the total of
the credit ratings in that category reported by all NRSROs was 21,791. Therefore, the percentage of NRSRO insurance
company ratings attributable to AMB was approximately 33.84% (i.e., 7,373 divided by 21,791, expressed as a
percentage), as shown on Chart 3.
In 2007, the year when NRSROs began reporting outstanding ratings on Form NRSRO, the large NRSROs accounted for
98.8% of all outstanding ratings.
See 2021 and 2022 Staff Report on NRSROs, which can be found under “Staff Reports on Nationally Recognized
Statistical Rating Organizations” and the Annual Reports to Congress and the Summary Examination 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/about/divisions-office/office-credit-ratings/reports-and-studies.

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

Chart 5. Breakdown of Ratings Reported
Outstanding by NRSRO as of December 31, 2022

Chart 6. Breakdown of Non-Government Securities
Ratings Reported Outstanding by NRSRO as of
December 31, 2022

31.6%

20.2%
6.5%
12.3%

1.6%

5.4%
3.4%

2.9%
0.7%

27.0%

0.4%

1.0%

0.2%
50.1%

1.8%

34.3%

0.3%

0.1%
<0.1%

S&P 50.1%

EJR 0.7%

MIS 31.6%

AMB 0.4%

Fitch 12.3%

JCR 0.2%

DBRS 2.9%

HR 0.1%

KBRA 1.6%

Demotech <0.1%

Percentages have been rounded to the nearest
one-tenth of one percent.
Sources: NRSRO annual certifications for the 2022
calendar year, Item 7A on Form NRSRO.

credit ratings reported across all categories and,
as shown on Chart 3 and Chart 7, is also the
most concentrated rating category, with the large
NRSROs accounting for 97.4% of all outstanding
government securities ratings.
Chart 5 depicts the percentages of the credit
ratings outstanding that are attributable to
each NRSRO over all the rating categories;
Chart 6 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; and
Chart 7 depicts the percentages of the credit
ratings outstanding that are attributable to each
applicable NRSRO in the government securities
category, in each case, as reported by each

0.1%

S&P 34.3%

EJR 3.4%

MIS 27.0%

AMB 1.8%

Fitch 20.2%

JCR 1.0%

DBRS 6.5%

HR 0.3%

KBRA 5.4%

Demotech 0.1%

Percentages have been rounded to the nearest
one-tenth of one percent.
Sources: NRSRO annual certifications for the 2022
calendar year, Item 7A on Form NRSRO.

NRSRO in its annual certification for the calendar
year ending December 31, 2022.
A comparison of Chart 5 to Chart 6 illustrates that
there is less concentration in the non-government
securities rating categories. S&P’s and Moody’s
percentage share of all outstanding ratings declines
by 15.8 and 4.6 percentage points, respectively,
when government securities are excluded. Fitch’s
percentage share of outstanding ratings, on the
other hand, increases by 7.9 percentage points
when government securities are excluded. The
percentage share for all the remaining NRSROs
also increases when government securities are
excluded. The government securities category
accounted for 78.6% of the total number of
credit ratings reported across all categories and,

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25

Chart 7. Breakdown of Government Securities
Ratings Reported Outstanding on December 31, 2022

32.83%
10.19%
1.97%

54.36%

0.59%

0.02%
0.03%

S&P 54.36%

KBRA 0.59%

MIS 32.83%

HR 0.03%

Fitch 10.19%

JCR 0.02%

DBRS 1.97%

Percentages have been rounded to the nearest
one-hundredth of one percent.
This chart only includes the NRSROs that are registered
in the government securities category.
Sources: NRSRO annual certifications for the 2022
calendar year, Item 7A on Form NRSRO.

as shown on Chart 3 and Chart 7, is also the
most concentrated rating category, with the large
NRSROs accounting for 97.4% of all outstanding
government securities ratings.
Further, it is difficult to graphically represent the
relative rating shares of EJR, AMB, HR, JCR,
and Demotech given that they, in the aggregate,

36

37

26

comprise only 1.4% of all outstanding ratings
when government securities are included. When
government securities are excluded, a clearer picture
of the relative percentage shares of the small and
medium NRSROs in the categories in which they are
active can be observed, as illustrated in Chart 6.
Chart 8 depicts the change in ratings outstanding
over a period of five years for all ratings other
than ratings in the government securities category
reported outstanding by NRSROs, as reported by
each NRSRO in its annual certifications for the
calendar years ending December 31, 2018, through
December 31, 2022.36
As illustrated in Chart 8, reported non-government
ratings outstanding have remained mostly steady
across all NRSROs over the past five years and,
consistent with the information shown in Chart
3 for the year ending December 31, 2022, the
larger NRSROs have significantly more ratings
outstanding than the medium and small NRSROs.
While modest on the scale of ratings outstanding
by the large NRSROs, Chart 8 shows a steady
increase in ratings for KBRA over the past five
years, a recent decrease in ratings for DBRS and
EJR, and a modest increase in ratings for the other
medium and small NRSROs. The changes in
outstanding ratings over time for these NRSROs
is more apparent when viewing changes in ratings
outstanding on a scale that includes only the
medium and small NRSROs, as illustrated in
Chart 9.37

Information for Demotech outstanding ratings is not included in Charts 8 and 9. As a recently registered NRSRO,
Demotech first filed its annual certification for the year ending December 31, 2022, and year-over-year data is not
available.
A comparison of Chart 6 in this Report with Chart 6 in Section IV.A.1 of the 2022 Staff Report on NRSROs (available at
https://www.sec.gov/files/2023-ocr-staff-report.pdf) shows that, other than DBRS, each small and medium NRSRO’s total
non-government securities ratings share as of December 31, 2022, remained constant or increased compared to the ratings
shares as of December 31, 2021. The largest percentage share changes were KBRA, whose percentage share increased by
0.9%, and DBRS, whose percentage share declined by 2.0%.

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

Chart 8. Total Non-Government Ratings Issued by All NRSROs (2018-2022)
180,000
160,000

S&P

140,000
Moody’s
120,000
100,000

Fitch

80,000
60,000
40,000

DBRS
KBRA
EJR
AMB
HR JCR

20,000
0

2018

2019

2020

2021

2022

Sources: NRSRO annual certifications for the 2018-2022 calendar years, Item 7A on Form NRSRO.

Chart 9. Total Non-Government Ratings Issued by Medium and Small NRSROs (2018-2022)
45,000
40,000
35,000
30,000

DBRS

25,000

KBRA

20,000
EJR

15,000
10,000

AMB

5,000

JCR

0

HR
2018

2019

2020

2021

2022

Sources: NRSRO annual certifications for the 2018-2022 calendar years, Item 7A on Form NRSRO.

S TA F F R E P O R T

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27

Chart 10. Total ABS Ratings Issued by All NRSROs (2018-2022)
60,000

Moody’s

50,000

40,000

S&P
Fitch
30,000

KBRA

20,000

DBRS

10,000
0

2018

2019

2020

2021

2022

Sources: NRSRO annual certifications for the 2018-2022 calendar years, Item 7A on Form NRSRO.

Chart 10 depicts the change in ratings outstanding
over a period of five years for all ratings in the
asset-backed securities rating class reported
outstanding by NRSROs.38

S&P have remained fairly steady. The number of
outstanding ratings for Moody’s has not changed
significantly in total, but Moody’s has shown an
increase in ratings outstanding in the past two years.

As discussed in more detail in Section IV.A.2,
medium NRSROs have been able to make inroads
in the asset-backed securities rating class. Chart
10 provides a graphic representation of changes
in ratings outstanding in this rating class since
2018. Both DBRS and KBRA have increased
or maintained the number of ratings reported
outstanding over the past five years. During this
same period, the ratings counts for Fitch and

b. NRSRO Analytical Staffing Levels

38

39

28

Chart 11 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.39
The large NRSROs report employing 4,754 credit
analysts (including supervisors), which is approxi-

Demotech, EJR, HR, and JCR are not registered with the Commission in the asset-backed securities category (see Chart
1). While AMB is registered to rate asset-backed securities, as shown in Chart 2, it only has seven outstanding asset-backed
securities ratings as of December 31, 2022. For these reasons, Chart 10 only includes data from DBRS, Fitch, KBRA,
Moody’s, and S&P.
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).

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

Chart 11. NRSRO Credit Analysts and
Credit Analyst Supervisors

Chart 12. NRSRO Fiscal Year Revenue as a
Percentage of Aggregate Reported Revenue

Credit Analysts
(Including Credit
Analyst Supervisors)

Credit Analyst
Supervisors

AMB

160

48

DBRS

584

157

Demotech

4

1

EJR

26

14

Fitch

1,372

333

HR

66

11

JCR

61

27

NRSRO

KBRA

242

55

Moody’s

1,796

243

S&P

1,586

133

Total

5,897

1,022

Sources: Exhibit 8 to Form NRSRO, in effect as of each
NRSRO’s annual certification for the 2022 calendar year
filed on or before March 31, 2023.

mately 80.6% of the total number employed by all
of the NRSROs. The small and medium NRSROs,
in the aggregate, employ approximately 19.4% of
all credit analysts employed by NRSROs.40 Total
NRSRO analytical staff increased by about 6%
compared to the information reported in the prior
year annual certifications.

40

41

42

2022

2021

2020

2019

Large NRSROs

91.1%

93.2%

94.1%

93.3%

Medium NRSROs

7.3%

5.6%

5.1%

5.9%

Small NRSROs

1.6%

1.1%

0.8%

0.8%

Percentages have been rounded to the nearest
one-tenth of one percent.
Sources: Financial reports filed with the Commission
under Rule 17g-3(a)(3) for fiscal years ended 2019
through 2022. 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.

c. NRSRO Revenue

Chart 12 shows the percentage of total NRSRO
revenues attributable to the large, medium, and
small NRSROs since 2019.41 Changes to the
composition of certain registered NRSROs and
the registration of an additional NRSRO in recent
years may limit the comparability of the revenue
distribution across the years.42 Nonetheless,
observations of changes to the distribution of
revenue may provide some insight into the overall
competitive landscape. Following a small increase
in fiscal year 2020, the percentage of aggregate
NRSRO revenue reported by the large NRSROs

Based on reports by the NRSROs on their annual certifications for the applicable calendar year, the small and medium
NRSROs, in the aggregate, 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, 15.4% of all NRSRO
analysts in 2018, 17.0% of all NRSRO analysts in 2019, 16.3% of all NRSRO analysts in 2020, and 18.4% of all
NRSRO analysts in 2021.
Pursuant to Rule 17g-3(a)(3), each NRSRO is required to file annually with the Commission an unaudited revenue report,
which includes revenue received from determining and maintaining credit ratings, subscribers and subscription services,
granting licenses or rights to publish credit ratings, and other services and products. NRSROs are not required to make
these revenue reports publicly available.
Following its acquisition of DBRS in July 2019, Morningstar, Inc. began to integrate the businesses of DBRS and
Morningstar Credit Ratings, LLC (MCR), which at the time was also registered as an NRSRO. Effective December 30,
2019, MCR withdrew its registration as an NRSRO. MCR continued to operate as a credit rating affiliate of DBRS until
November 23, 2020. Additionally, as a recently registered NRSRO, Demotech first filed the financial report required under
Rule 17g-3(a)(3) for the fiscal year ended in 2022 and is not included in prior years.

S TA F F R E P O R T

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29

has fallen below the level reported for fiscal year
2019. The revenue share of the medium NRSROs
has increased from 2021, reaching a new high
of 7.3% in 2022. The small NRSROs’ share of
overall NRSRO revenue has also increased this
year, growing by 0.5 percentage points in fiscal year
2022 compared with 2021.
■

Further revenue information is available for
NRSROs that are owned by public companies.
The following information is from the 2022 annual
reports of public companies with an ownership
interest in an NRSRO:
■

■

Moody’s Corporation, which is Moody’s parent
company, reported $2.7 billion in Moody’s
external revenue for 2022, a 29% decrease from
2021. This decrease, according to the report,
was due to muted credit market activity across
all sectors given ongoing market volatility and
central bank actions. The corporate finance
group, financial institutions group, public,
project and infrastructure finance group, and
structured finance group of Moody’s each had a
decrease in revenue compared to 2021 results.43
S&P Global Inc., which is S&P’s parent
company, reported $3.1 billion in S&P’s
revenue for 2022, a 26% decrease from 2021.
This decrease, according to the report, was due
to lower corporate bond ratings revenue, bank
loan ratings revenue, and structured finance
revenue. Non-transaction revenue decreased

primarily due to an unfavorable impact of
foreign exchange rates, a decrease in entity
credit ratings revenue, and lower revenue from
S&P’s Ratings Evaluation Service, an analytical
tool for entities that are considering strategic
or financial initiatives that could impact their
creditworthiness.44
Morningstar, Inc., which is DBRS’s parent
company, reported $236.9 million in revenue
from DBRS, a 12.6% decrease in revenue
from 2021. This decrease, according to the
report, was due to a sharp decrease in credit
issuance in the second half of the year, along
with significant declines in commercial and
residential mortgage-backed securities ratings.
Transaction-based revenue from one-time,
transaction-based fees for ratings on newlyissued securities decreased 11% in 2022.45

Recent regulatory filings show a decline in revenues
at Moody’s and DBRS and a slight increase in
revenue at S&P in the first half of 2023 compared
to the same period in 2022. Moody’s Corporation
reported $1.5 billion in Moody’s external revenue
for the first half of 2023, a 3% decrease compared
with the same period in 2022. This decrease,
according to the report, was due to declines in
bank loan and structured finance issuance resulting
from market volatility relating to macroeconomic
uncertainties, higher borrowing costs, and the
Russia-Ukraine conflict. This decrease in external
revenue was partially offset by an increase in

45

See Moody’s Corporation, Annual Report on Form 10-K for the year ended December 31, 2022, available at https://www.
sec.gov/Archives/edgar/data/1059556/000105955623000016/mco-20221231.htm.
See S&P Global Inc., Annual Report on Form 10-K for the year ended December 31, 2022, available at https://www.sec.
gov/ix?doc=/Archives/edgar/data/64040/000006404023000058/spgi-20221231.htm.
See Morningstar, Inc., Annual Report on Form 10-K for the year ended December 31, 2022, available at https://www.
sec.gov/ix?doc=/Archives/edgar/data/1289419/000128941923000005/morn-20221231.htm. Transaction-based revenue
from one-time, transaction-based fees for ratings on newly-issued securities represented 57.6% of the revenue generated by
DBRS, with the remainder classified as transaction related revenue or revenue generated by annual fees tied to surveillance,
research, and other services.

30

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43
44

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

investment grade corporate debt issuance compared
to suppressed activity in 2022.46

ratings, corporate credit ratings, and revenue
related to data products.48

S&P Global Inc. reported $1.7 billion in revenue
at S&P for the first half of 2023, a 1% increase
compared with the same period in 2022. This
increase, according to the report, was due to
growth in corporate bond ratings revenue driven
by increased investment-grade and high-yield
issuance volumes due to higher refinancing activity.
According to the report, the increase in revenue
was partially offset by lower bank loan ratings
revenue driven by decreased issuance volumes.47

2. Market Share Observations in the AssetBacked Securities Rating Category
As noted in Section IV.A.1.a 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. The market share data discussed in
this Section IV.A.249 provides information about
ratings issued in 2021, 2022, and the first half
of 2023 and shows that DBRS and KBRA have
achieved meaningful market share percentages in
recent years with respect to certain types of assetbacked securities.50

Morningstar, Inc. reported $101.0 million in DBRS
revenue for the first half of 2023, a 24.9% decrease
compared with the same period in 2022. This
decrease, according to the report, primarily resulted
from a sharp drop in revenue from commercial
mortgage-backed securities ratings. Additionally,
revenue from financial institutions and sovereigns
also declined but were partially mitigated by
growth in revenue from asset-backed securities

46
47
48
49
50

51

Section IV.A.2.a and 2.b below discuss NRSRO
market share information with respect to certain
asset-backed securities, based on information
from the databases available on the Commercial
Mortgage Alert and Asset-Backed Alert websites.51

See Moody’s Corporation, Quarterly Report on Form 10-Q for the period ended June 30, 2023, available at https://www.
sec.gov/ix?doc=/Archives/edgar/data/0001059556/000105955623000052/mco-20230630.htm.
See S&P Global Inc., Quarterly Report on Form 10-Q, for the period ended June 30, 2023, available at https://www.sec.
gov/ix?doc=/Archives/edgar/data/64040/000006404023000159/spgi-20230630.htm.
See Morningstar, Inc., Quarterly Report on Form 10-Q for the period ended June 30, 2023, available at https://www.sec.
gov/ix?doc=/Archives/edgar/data/0001289419/000128941923000015/morn-20230630.htm.
Unless noted otherwise, all market share percentages in this Section IV.A.2 are based on dollar amounts of issuance.
DBRS and KBRA are the only medium or small NRSROs that actively rate asset-backed securities. Demotech, EJR,
HR, and JCR are not registered with the Commission in the asset-backed securities category. See Chart 1. While AMB
is registered to rate asset-backed securities, as shown in Chart 2, it only has seven outstanding asset-backed securities
ratings as of December 31, 2022. For these reasons, this section only discusses observations related to DBRS, Fitch, KBRA,
Moody’s, and S&P, which are the five NRSROs registered in the asset-backed securities category with current asset-backed
securities rating activity.
See Commercial Mortgage Alert website, available at https://www.greenstreet.com/news/commercial-mortgage-alert and
Asset-Backed Alert website, available at https://www.greenstreet.com/news/asset-backed-alert. The information in Charts
13 through 16 is based on information from the Commercial Mortgage Alert’s CMBS database as of July 28, 2023, and
the information in Charts 17 through 19 and the accompanying discussion is based on information from the Asset-Backed
Alert’s ABS database as of July 28, 2023. Although analysis of the information from the databases 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.

S TA F F R E P O R T

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31

CMBS transactions rated by NRSROs. The charts
include reported market share information for total
non-agency U.S. CMBS transactions,56 U.S. conduit
CMBS transactions, U.S. single-borrower CMBS
transactions, and agency CMBS transactions57 for
the first half of calendar year 2023 and calendar
years 2022 and 2021.58

a. CMBS

Charts 13 through 16 provide information
concerning U.S.52 CMBS53 ratings by NRSROs,
based on information from the Commercial
Mortgage Alert database. NRSRO market share
varies between the conduit CMBS and singleborrower CMBS segments,54 the two segments
that account for most of the non-agency55 U.S.

Chart 13. Rating Agency Market Shares for Total Non-Agency U.S. CMBS Issued in 2021, 2022, and
First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

Fitch

10,638

15

78.0/71.4

38,114

37

54.3/45.7

57,361

60

51.9/42.3

2

Moody’s

7,747

12

56.8/57.1

46,275

51

65.9/63.0

38,342

45

34.7/31.7

3

KBRA

7,663

11

56.2/52.4

28,249

28

40.2/34.6

46,466

47

42.0/33.1

4

S&P

4,293

6

31.5/28.6

17,589

21

25.0/25.9

17,589

55

15.9/38.7

5

DBRS

2,650

4

19.4/19.0

26,126

27

37.2/33.3

56,655

71

51.2/50.0

Total Rated Market

13,638

21

70,231

81

110,557

142

Source: Commercial Mortgage Alert’s CMBS database as of July 28, 2023.

52

53

54

55
56
57
58

32

Based on information about the databases available on the Asset-Backed Alert and Commercial Mortgage Alert websites,
references to “U.S.” CMBS, MBS, ABS, and CLO issuance and market shares in this Section IV.A.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.
Based on information about the database available on the Commercial Mortgage Alert website, the “CMBS” category
is comprised of transactions secured by a static pool of mortgages or leases on income producing properties, either
commercial or multi-family.
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.
“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.
Total U.S. CMBS transactions include single-borrower CMBS, conduit CMBS, and other types of CMBS, such as large
loan and small-balance/legacy conduit CMBS transactions.
Only agency CMBS transactions with a rating from one or more NRSROs are included for determining NRSRO market
share in the agency CMBS category.
The market share percentages for each NRSRO in Charts 13 through 16 reflect the amount rated by the NRSRO as a
percentage of the total amount rated by one or more NRSRO. Market share percentages are provided based on both
dollar amounts of issuance and number of deals rated. Because it is typical for more than one NRSRO to rate a particular
transaction, the sum of the market share percentages may exceed 100% and the sum of the amounts attributed to each
NRSRO may exceed the total rated amount. The source of the data for these charts is the Commercial Mortgage Alert’s
CMBS database as of July 28, 2023.

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

Chart 14. Rating Agency Market Shares for U.S. Conduit CMBS Issued in 2021, 2022, and First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

Fitch

6,989

9

100.0/100.0

23,750

25

100.0/100.0

31,428

32

100.0/100.0

1

KBRA

6,989

9

100.0/100.0

17,015

18

71.6/72.0

25,809

26

82.1/81.3

2

Moody’s

3,597

5

51.5/55.6

13,615

14

57.3/56.0

6,771

7

21.5/21.9

3

S&P

3,393

4

48.5/44.4

9,646

10

40.6/40.0

22,906

22

72.9/68.8

4

DBRS

0

0

0.0/0.0

8,889

9

37.4/36.0

6,984

7

22.2/21.9

6,989

9

23,750

25

31,428

32

Total Rated Market

Source: Commercial Mortgage Alert’s CMBS database as of July 28, 2023.

Chart 15. Rating Agency Market Shares for U.S. Single-Borrower CMBS Issued in 2021, 2022, and
First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

Moody’s

4,150

7

62.4/58.3

32,383

36

70.1/65.5

31,571

38

39.9/34.5

2

Fitch

3,649

6

54.9/50.0

14,364

12

31.1/21.8

25,933

28

32.8/25.5

3

DBRS

2,650

4

39.9/33.3

17,237

18

37.3/32.7

49,671

64

62.8/58.2

4

S&P

900

2

13.5/16.7

7,943

11

17.2/20.0

22,979

33

29.0/30.0

5

KBRA

674

2

10.1/16.7

10,957

9

23.7/16.4

20,657

21

26.1/19.1

Total Rated Market

6,649

12

46,204

55

79,128

110

Source: Commercial Mortgage Alert’s CMBS database as of July 28, 2023.

Chart 16. Rating Agency Market Shares for Agency CMBS Issued in 2021, 2022, and First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

KBRA

5,615

5

87.5/83.3

15,690

13

64.8/65.0

7,538

7

31.8/35.0

2

Fitch

4,570

4

71.2/66.7

14,240

12

58.8/60.0

22,469

19

94.9/95.0

3

Moody’s

1,847

2

28.8/33.3

9,989

8

41.2/40.0

1,216

1

5.1/5.0

4

DBRS

802

1

12.5/16.7

8,539

7

35.2/35.0

16,147

13

68.2/65.0

Total Rated Market

6,417

6

24,229

20

23,685

20

Source: Commercial Mortgage Alert’s CMBS database as of July 28, 2023.

S TA F F R E P O R T

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33

Charts 13 through 16 show that in 2021, 2022,
and the first half of 2023 the large NRSROs
generally held a large percentage of the market
shares in rating U.S. CMBS rated transactions,
but DBRS and KBRA achieved significant market
shares as well.
As illustrated in Chart 13, in the first half of 2023,
KBRA had the third-highest market share in the
non-agency U.S. CMBS segment. In 2022, KBRA
and DBRS had the third- and fourth-highest market
shares, respectively. In 2021, DBRS was closely
behind Fitch for the second-highest market share
measured by issuance amount, and KBRA had the
third-highest market share by both issuance amount
and number of deals. KBRA has consistently
attained a market share over 40% by issuance
amount since 2021, and in 2021 KBRA obtained a
higher market share than Moody’s and S&P.
Since 2021, Fitch has maintained the highest
market share in the U.S. conduit CMBS segment,
rating all rated transactions. However, as illustrated
in Chart 14, KBRA has maintained the secondhighest market share in the U.S. conduit CMBS
segment since 2021. Additionally, as of the first

59

60

61

62

34

half of 2023, KBRA has rated all U.S. conduit
CMBS rated transactions, and in 2020 and 2021
DBRS rated over 20% of these transactions.
As illustrated in Chart 15, DBRS achieved significant market share in this segment, achieving the
highest market share in 2021, the second-highest
for 2022, and the third-highest for the first half of
2023. Additionally, KBRA rated nearly 25% of
the issuance amount in 2022 and over 25% of the
issuance amount in 2021.
As illustrated in Chart 16, KBRA had the highest
market share in the agency CMBS segment during
the first half of 2023 and in 2022. Additionally,
DBRS had the second-highest market share in 2021.
b. ABS/MBS/CLO

Charts 17 through 19 provide information
concerning U.S. ABS,59 U.S. MBS,60 and U.S. CLO61
ratings by NRSROs, based on information from
the Asset-Backed Alert database. The charts include
reported market share information for these transactions for the first half of calendar year 2023 and
calendar years 2022 and 2021.62

Based on information about the database available on the Asset-Backed Alert website, the “ABS” category is comprised
of securities that are collateralized by assets other than the following: CMBS; MBS; CLOs; collateral debt obligations
collateralized primarily by other securities; issuances by municipalities; tax exempt issues; issues that are fully retained by
an affiliate of the deal sponsor or sold to a commercial paper-conduit operated by an affiliate of the sponsor; commercial
paper and other continuously offered securities such as medium-term notes; and refinancing of previously offered
securities.
Based on information about the database available on the Asset-Backed Alert website, the “MBS” category is comprised of
registered securities backed by U.S. first-lien residential properties (typically jumbo mortgages that would otherwise meet
the criteria of Fannie Mae and Freddie Mac) and Alt-A home loans.
Based on information about the database available on the Asset-Backed Alert website, the “CLO” category is comprised
of deals that take the form of collateralized loan obligations (exclusive of collateralized debt obligations collateralized
primarily by other securities). In the period reviewed, these consisted of deals involving corporate loan arbitrage, small
business/SME loans, and commercial real estate loans.
The market share percentages for each NRSRO in Charts 17 through 19 reflect the amount rated by the NRSRO as a
percentage of the total amount rated by one or more NRSRO. Market share percentages are provided based on both
dollar amounts of issuance and number of deals rated. Because it is typical for more than one NRSRO to rate a particular
transaction, the sum of the market share percentages may exceed 100% and the sum of the amounts attributed to each
NRSRO may exceed the total rated amount. The source of the data for these charts is the Asset-Backed Alert’s ABS
database as of July 28, 2023.

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

Chart 17. Rating Agency Market Shares for U.S. ABS Issued in 2021, 2022, and First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

S&P

79,177

108

59.0/49.3

144,924

182

56.3/42.7

162,345

217

55.1/47.1

2

Fitch

73,543

86

54.8/39.3

116,645

145

45.3/34.0

102,453

102

34.8/22.1

3

Moody’s

65,782

85

49.0/38.8

130,187

161

50.6/37.8

146,191

154

49.6/33.4

4

KBRA

26,394

69

19.7/31.5

56,005

153

21.8/35.9

73,391

188

24.9/40.8

5

DBRS

19,210

45

14.3/20.5

35,078

84

13.6/19.7

68,983

137

23.4/29.7

Total Rated Market

134,120

219

257,420

426

294,687

461

Source: Asset-Backed Alert’s ABS database as of July 28, 2023.

Chart 18. Rating Agency Market Shares for U.S. MBS Issued in 2021, 2022, and First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

Fitch

21,395

63

70.8/68.5

48,257

113

43.9/42.3

65,263

149

40.1/41.0

2

DBRS

15,142

43

50.1/46.7

39,010

100

35.5/37.5

62,200

115

38.2/31.7

3

KBRA

8,865

25

29.3/27.2

57,810

124

52.6/46.4

63,376

143

38.9/39.4

4

S&P

4,012

13

13.3/14.1

22,106

58

20.1/21.7

25,492

76

15.6/20.9

5

Moody’s

2,168

6

7.2/6.5

37,000

72

33.6/27.0

79,738

140

48.9/38.6

Total Rated Market

30,220

92

109,984

267

162,937

363

Source: Asset-Backed Alert’s ABS database as of July 28, 2023.

Chart 19. Rating Agency Market Shares for U.S. CLOs Issued in 2021, 2022, and First Half of 2023
1H-2023
Rank

NRSRO

1H-2023
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2022
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

2021
Issuance
($Mil.)

No. of
deals

Market
Share %
($)/(#)

1

S&P

30,652

71

56.9/55.5

65,408

140

42.0/41.2

254,633

532

56.1/54.3

2

Moody’s

29,273

69

54.3/53.9

93,372

202

59.9/59.4

225,675

506

49.7/51.7

3

Fitch

22,769

53

42.2/41.4

75,505

158

48.4/46.5

76,710

158

16.9/16.1

4

KBRA

740

3

1.4/2.3

3,590

10

2.3/2.9

16,342

32

3.6/3.3

5

DBRS

0

0

0.0/0.0

1,047

4

0.7/1.2

3,227

4

0.7/0.4

53,896

128

155,890

340

453,835

979

Total Rated Market

Source: Asset-Backed Alert’s ABS database as of July 28, 2023.

S TA F F R E P O R T

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35

Chart 17 shows that DBRS and KBRA have
achieved and maintained meaningful U.S. ABS
rating market shares, although their relative shares
have declined since 2021. S&P, Moody’s, and Fitch
have consistently achieved the highest market shares
based on issuance amount. KBRA has maintained
market share of approximately 20% or higher since
2021 and DBRS approximately 14% or higher.
Chart 17 presents an overview of NRSRO market
share for ABS overall, but an analysis of the data
underlying the chart shows that the market shares
vary considerably across various types of ABS
products. For example, DBRS and KBRA have
gained significant market share in some newer or
less traditional types of asset-backed securities.
They are significant raters of securities backed by
unsecured consumer loans, including consumer
loans originated through marketplace lending
platforms. DBRS and KBRA had the two highest
market shares in this category in 2021, 2022, and
the first half of 2023, with each rating between
42.7% to 56.6% of the issuance amount of the rated
transactions during this period. Comparatively,
Moody’s, S&P, and Fitch each rated less than 30%
of the issuance amount over the same time period.63
There are additional examples of market share
gains achieved by a medium NRSRO in discrete

63

64
65

66

67

36

asset classes. For instance, KBRA rated 85.6%
and 100% of the issuance amount of aircraftlease receivables transactions during 2021 and
2022, respectively, while Moody’s, S&P, and Fitch
each rated less than 55% of the issuance amount
over the same time period.64 KBRA also had the
second-highest market share for whole-business
securitizations in 2021, and the highest market
share in 2022 and the first half of 2023, rating
60.2%, 92.1% and 100%, respectively, of the
issuance amount of such transactions.65 DBRS
and KBRA had the two highest market shares
for small business loan transactions in 2021,
2022, and the first half of 2023, with each rating
between 32.6% to 78.7% during this period.
Comparatively, Moody’s, S&P, and Fitch each
rated less than 12.8% of the issuance amount over
the same time period.66
DBRS and KBRA have been able to gain market
share rating certain more traditional types of ABS
as well. For example, DBRS rated 90.2%, 94.1%,
and 82.3% of the issuance amount of student loan
transactions during 2021, 2022, and the first half
of 2023, respectively, which represented the firstor second-highest market share.67
Both DBRS and KBRA have maintained a significant market share in certain auto-related asset-

Asset-Backed Alert’s ABS database indicates that 74 unsecured consumer loan transactions totaling $27.7 billion were
issued in 2021, 75 unsecured consumer loan transactions totaling $26.1 billion were issued in 2022, and 26 unsecured
consumer loan transactions totaling $8.9 billion were issued during the first half of 2023.
Asset-Backed Alert’s ABS database indicates that 16 aircraft-lease receivable transactions totaling $9.2 billion were issued
during 2021, and two aircraft-lease receivable transactions totaling $1.1 billion were issued during 2022.
Asset-Backed Alert’s ABS database indicates that 19 whole-business securitization transactions totaling $13.9 billion were
issued during 2021, 14 whole-business securitization transactions totaling $6.3 billion were issued during 2022, and three
whole business securitization transactions totaling $1.6 billion were issued during the first half of 2023.
Asset-Backed Alert’s ABS database indicates that 13 small business loan transactions totaling $2.1 billion were issued
in 2021, 17 small business loan transactions totaling $7.5 billion were issued in 2022, and nine small business loan
transactions totaling $1.2 billion were issued during the first half of 2023.
Asset-Backed Alert’s ABS database indicates that 50 student loan transactions totaling $32.3 billion were issued in 2021,
11 student loan transactions totaling $7.5 billion were issued in 2022, and eight student loan transactions totaling $4.7
billion were issued during the first half of 2023.

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

backed securities. In 2021, 2022, and the first half
of 2023, DBRS rated 33.1%, 30.6%, and 30.4%
of subprime auto loan transactions, respectively.
KBRA also maintained a significant market share;
in 2021, 2022, and the first half of 2023, KBRA
rated 35.1%, 37.8%, and 40.0% of the issuance
amount of subprime auto loan transactions.68

subprime mortgage transactions from 2021 to the
first half of 2023, KBRA rated between 34.5%
and 52.4% and DBRS rated between 26.6% and
34.9% of the issuance amount; for risk transfer
transactions, KBRA rated between 26.1% and
61.3% and DBRS rated between 26.7% and
50.0% of the issuance amount.70

Chart 18 shows that the U.S. MBS segment
remains competitive. DBRS’s market share by
issuance amount went from 38.2% in 2021 to
35.5% in 2022 to 50.1% in the first half of 2023,
while KBRA’s market share by issuance amount
went from 38.9% in 2021 to 52.6% in 2022 to
29.3% in the first half of 2023. DBRS and KBRA
have, however, achieved notable market share
in certain types of ABS related to the residential
housing market, but not considered to be MBS
under the Asset-Backed Alert database’s criteria
and therefore included within the data shown in
Chart 17. For example, in 2021, 2022, and the
first half of 2023, DBRS rated 79.5%, 85.0%, and
95.1% of the issuance amount of re-performing
mortgage transactions, respectively, which represented the first- or second-highest market share.69
Additionally, KBRA and DBRS have maintained
a significant market share in subprime mortgage
transactions and risk transfer transactions. For

Finally, as shown in Chart 19, although DBRS
and KBRA have attained a foothold in the U.S.
CLO segment, their individual market shares have
decreased. In comparison, S&P, Moody’s, and
Fitch have maintained the highest market shares
since 2021.

68

69

70

71

3. Barriers to Entry
Barriers to entry continue to exist in the credit
ratings industry, presenting competitive challenges
for the small and medium NRSROs.
One such potential barrier that has been raised
by certain small and medium NRSROs is that 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 require the use of ratings of specified
NRSROs.71 The effect of these requirements can

Asset-Backed Alert’s ABS database indicates that 68 subprime auto loan transactions totaling $43.5 billion were issued
in 2021, 63 subprime auto loan transactions totaling $33.5 billion were issued in 2022, and 41 subprime auto loan
transactions totaling $19.7 billion were issued during the first half of 2023.
Asset-Backed Alert’s ABS database indicates that 32 re-performing mortgage transactions totaling $19.8 billion, were
issued in 2021, 29 re-performing mortgage transactions totaling $14.4 billion were issued in 2022, and ten re-performing
mortgage transactions totaling $4.7 billion were issued during the first half of 2023.
Asset-Backed Alert’s ABS database indicates that 93 subprime mortgage transactions totaling $29.3 billion, and 37 risk transfer
transactions totaling $23.5 billion were issued during 2021, 104 subprime mortgage transactions totaling $37.9 billion, and
26 risk transfer transactions totaling $23.1 billion were issued during 2022, and 43 subprime mortgage transactions totaling
$14.7 billion, and 10 risk transfer transactions totaling $5.9 billion were issued during the first half of 2023.
See Statement of Jim Nadler, President and CEO, Kroll Bond Rating Agency, Bond Rating Agencies: Examining the
“Nationally Recognized” Statistical Rating Organizations Hearing Before the Subcommittee on Investor Protection,
Entrepreneurship and Capital Markets of the House Committee on Financial Services, 117th Congress (July 21, 2021),
available at https://democrats-financialservices.house.gov/UploadedFiles/HHRG-117-BA16-Wstate-NadlerJ-20210721.
pdf; see also Letter from KBRA to the Commission (Aug. 19, 2014), available at https://www.sec.gov/comments/s7-18-11/
s71811-88.pdf.

S TA F F R E P O R T

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be to increase the demand for and liquidity of
securities bearing the ratings of specified rating
agencies, which may provide an incentive for
issuers to obtain ratings from the specified agencies.
Historically, many of these guidelines refer to the
ratings from the large NRSROs by name (i.e.,
Fitch, Moody’s, and S&P). Despite reports that
investors are increasingly changing their guidelines
to allow for investments in securities rated by a
wider group of NRSROs,72 investment guidelines
continue to be identified as a factor impacting the
selection of NRSROs to rate certain transactions.73
The inclusion requirements of some fixed income
indices may pose a similar barrier to entry. To
be included in certain of these indices, securities
must be rated by specified NRSROs.74 Certain
investment companies try to closely track the
performance of the indices by purchasing the
securities included in them (index funds). Index
funds have grown as a share of the fund market,

and they can increase the demand for securities
bearing the ratings of particular NRSROs.75 For
instance, in 2018, 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.76 Similarly, KBRA testified that
many companies benchmark to such indices for
investment purposes and thus will not purchase
bonds that are index ineligible and not rated by
particular NRSROs.77
Market participants and academics have identified
various other barriers to entry in the credit rating
industry, including economic and regulatory
barriers.78 For instance, when the Commission
proposed new rules and rule amendments (the
NRSRO Amendments) in accordance with the
Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act)79 commenters
expressed concerns that certain of the proposed

79

See, e.g., Big Investors Accept More Rating Agencies, Asset-Backed Alert, May 19, 2017.
See S&P Vaults Past Moody’s in Conduit Sector, Commercial Mortgage Alert, Jan. 24, 2020, see also S&P, Moody’s Duke
It Out in Fitch’s Shadow, Commercial Mortgage Alert, Jan. 25, 2019.
See, e.g., Bloomberg Fixed Income Index Methodology, Bloomberg Fixed Income Indices, August 24, 2021; FTSE Fixed
Income Index Guide, FTSE Russell an LSEG Business, June 2023.
See, e.g., Rating Firms Seek Changes to Index, Asset-Backed Alert, May 26, 2017; see also Investment Company Institute,
2022 Investment Company Fact Book (2022), at 29, available at https://www.icifactbook.org/ (index funds made up 21%
of assets in long-term funds at the end of 2011 and 43% at the end of 2021).
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.
See Written Testimony of Angela Liang, General Counsel and Executive Committee Member, Kroll Bond Rating Agency,
Bond Rating Agencies: Examining the “Nationally Recognized” Statistical Rating Organizations Hearing Before the
Subcommittee on Investor Protection, Entrepreneurship and Capital Markets of the House Committee on Financial
Services, 117th Congress (May 11, 2022), available at https://www.congress.gov/117/meeting/house/114740/witnesses/
HHRG-117-BA16-Wstate-LiangA-20220511.pdf.
See, e.g., Section IV.C of the March 2012 Annual Report, available at https://www.sec.gov/divisions/marketreg/
ratingagency/nrsroannrep0312.pdf. As discussed in the March 2012 Report, economic barriers to entry include issuers and
market participants favoring well-established NRSROs due to their reputation, and economies of scale which may allow
larger NRSROs to offer advantageous services or pricing. Academic literature has continued to identify these as barriers to
entry. See, e.g., Sangiorgi, F. and Spatt, C., The Economics of Credit Rating Agencies, Foundations and Trends in Finance,
12, 1-116 (2017), available at https://ssrn.com/abstract=3055889.
Pub. L. No. 111-203, § 932, 124 Stat. 1376, 1872-83 (2010).

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73
74
75

76

77

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

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.80 In connection with the adoption of 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.81
At the same time, the Commission recognized
substantial benefits associated with the NRSRO
Amendments implementing Title IX, Subtitle C of
the Dodd-Frank Act, which was designed to address
the causes of certain market failures that may
impair the integrity and transparency of NRSRO
credit ratings.82 For instance, certain provisions of
the NRSRO Amendments were designed primarily
to enhance the integrity of how NRSROs determine
credit ratings by improving internal governance
of NRSROs, managing potential principal-agent
problems and conflicts of interest in the credit
rating process, and promoting adherence to the
procedures and methodologies for determining

80

81
82

83
84
85
86

credit ratings.83 Other provisions of the NRSRO
Amendments were designed mainly to enhance the
transparency of NRSRO credit ratings by increasing
disclosure and reducing information asymmetries
that may adversely affect users of credit ratings.84
The NRSRO Amendments as adopted by the
Commission include various changes from the
proposed amendments intended to address
concerns regarding barriers to entry, including
standards allowing NRSROs to tailor particular
requirements to their business models, size, and
rating methodologies.85
Additionally, there are provisions for exemptions
built into several rules and statutory provisions if
the Commission deems that these requirements may
impose an unreasonable burden on the NRSRO.
NRSROs may also request exemptions under
Section 36 to Exchange Act rules or provisions.86

B. TRANSPARENCY
Congress 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

See 2014 Adopting Release, 79 FR 55078 (Sept. 15, 2014) at 55090, 55154, 55161, and

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3Af38a9a8fa6485fa7. Public record. Not legal advice.