ANNUAL REPORT | i

OFFICE OF CREDIT RATINGS 

Annual 

Report 

ON 

NATIONALLY 

RECOGNIZED 

STATISTICAL RATING 

ORGANIZATIONS 

As Required by Section 6 of the Credit 

Rating Agency Reform Act of 2006 

December 2020 

U . S . S E C U R I T I E S A N D E X C H A N G E C O M M I S S I O N 
 | OFFICE OF CREDIT RATINGS 

THIS IS A REPORT OF THE STAFF OF THE U.S. SECURITIES AND EXCHANGE COMMISSION. 

THE COMMISSION HAS EXPRESSED NO VIEW REGARDING THE ANALYSIS, FINDINGS, OR CONCLUSIONS CONTAINED HEREIN. ii
ANNUAL REPORT | i

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ii | OFFICE OF CREDIT RATINGS

Table of Charts

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

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

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

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

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

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

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

Chart 5. Breakdown of Non-Government Securities Ratings Reported

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

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

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

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

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

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

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

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

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

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

Chart 11. Rating Agency Market Share for Agency CMBS

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

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

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

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

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

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

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

I. Introduction 

The staff (the “Staff”) of the U.S. Securities 

and Exchange Commission (the 

“Commission” or “SEC”) is providing 

this report (“Report”) regarding nationally 

recognized statistical rating organizations 

(“NRSROs”) pursuant to Section 6 of the Credit 

Rating Agency Reform Act of 2006 (“Rating Agency 

Act”).1

 This Report reflects solely the Staff’s views. 

Section 6 of the Rating Agency Act requires the 

Commission to submit an annual report (“Annual 

Report”) to the Committee on Banking, Housing, 

and Urban Affairs of the U.S. Senate and the 

Committee on Financial Services of the U.S. House 

of Representatives (“Congressional Committees”) 

that, with respect to the year to which the Annual 

Report relates:

§	identifies applicants for registration as NRSROs 

under Section 15E of the Securities Exchange Act 

of 1934, as amended (the “Exchange Act”);2

§	specifies the number of, and actions taken on, 

such applications; and

§	specifies the views of the Commission on the state 

of competition, transparency, and conflicts of 

interest among NRSROs.

1 Pub. L. No. 109-291, 120 Stat. 1327 (Sept. 29, 2006). The Rating Agency Act, among other things, added Section 15E 

to the Securities Exchange Act of 1934 to establish self-executing requirements on NRSROs and provide the Commission

with the authority to implement a registration and oversight program for NRSROs. In June 2007, the Commission 

approved rules implementing such a program. See Oversight of Credit Rating Agencies Registered as Nationally 

Recognized Statistical Rating Organizations, Release No. 34-55857 (June 5, 2007), 72 FR 33564 (June 18, 2007), 

available at https://www.sec.gov/rules/final/2007/34-55857fr.pdf.

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

Act and related rules.

3 Note, however, that Section III.B of this Report includes information regarding Commission Orders and Releases and Staff

Publications from June 26, 2019 through November 30, 2020.

4 Prior Annual Reports can be found under “Annual Reports to Congress” in the “Reports and Studies” section of the OCR 

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

This Report generally focuses on the period from 

June 26, 2019 to June 25, 2020 (the “Report 

Period”).3 In addition to addressing the items 

specified in Section 6 of the Rating Agency Act, this 

Report provides an overview of certain Commission 

and Staff activities relating to NRSROs. 

Information regarding the topics covered in this 

Report with respect to prior periods can be found 

on the Office of Credit Ratings (“OCR”) page of the 

Commission’s website.4

ANNUAL REPORT | 1
 

 

II. Status of Registrants 

and Applicants 

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: 

i. financial institutions, brokers, or dealers; 

ii. insurance companies; 

iii. corporate issuers; 

iv. issuers of asset-backed securities (as that term 

is defined in 17 CFR 229.1101(c)); 

v. issuers of government securities, municipal 

securities, or securities issued by a foreign 

government; or 

vi. a combination of one or more categories of 

obligors described in any of clauses (i) through 

(v) above. 

As of November 30, 2020, there are nine credit 

rating agencies registered as NRSROs.5

 Chart 1 

below lists each NRSRO registered with the 

Commission, categories of credit ratings described 

in clauses (i) through (v) of Section 3(a)(62)(A) in 

which each NRSRO is registered, and location of 

each NRSRO’s principal office.6 

Chart 1: List of NRSROs 

NRSRO Categories of Credit Ratings Principal Offce 

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

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

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

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

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

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

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

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

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

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

Commission as an NRSRO. 

6 See the current Form NRSRO on each NRSRO’s website for any updates to this information. Each NRSRO must file with 

the Commission on EDGAR a Form NRSRO for annual certification and registration updates pursuant to Rule 17g-1(e) 

and (1)(f), and each NRSRO must make its current Form NRSRO publicly and freely available on its website pursuant to 

Rule 17g-1(i). Links to each NRSRO’s website can be found under the “Current NRSROs” section of the OCR webpage, 

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

2 | OFFICE OF CREDIT RATINGS 
 

On July 2, 2019, Morningstar, Inc., the parent 

of Morningstar Credit Ratings, LLC (“MCR”), 

completed an acquisition of DBRS and the two 

NRSROs began integrating their operations. On 

November 15, 2019, MCR furnished a notice of 

withdrawal from registration to the Commission 

(which became effective on December 30, 2019), 

and DBRS filed an update to Form NRSRO to add 

MCR as a credit rating affiliate. On November 

23, 2020, DBRS filed an update to Form NRSRO 

to remove MCR as a credit rating affiliate. For 

purposes of this Report: (1) activities of DBRS, 

Inc. prior to July 2, 2019 are attributed to 

“pre-integration DBRS;” (2) activities of MCR prior 

to July 2, 2019 are attributed to “MCR;” and (3) 

activities of the two NRSROs from July 2, 2019 

onward are attributed to “DBRS.” 

For purposes of this Report only, we refer to Fitch, 

MIS, and S&P as “larger NRSROs” and the other 

NRSROs (AMB, DBRS, EJR, HR, JCR, and KBRA) 

as “smaller NRSROs.” 

Applications for initial registration and for registration by current NRSROs in additional rating 

categories are filed on Form NRSRO.7

 In addition, 

Section 15E(b) requires NRSROs to promptly 

amend Form NRSRO if any information or 

document provided therein becomes materially 

inaccurate. This section also requires NRSROs to 

annually amend Form NRSRO to update ratings 

count and performance information, certify the 

continuing accuracy of the information and 

documents provided therein, and list any material 

change thereto during the previous calendar year. 

OCR Staff review such amendments to Forms 

NRSRO in light of the requirements of Section 

15E(b), Rule 17g-1, and the Instructions to 

Form NRSRO. 

No applications for initial registration as an NRSRO 

or for registration by a current NRSRO in additional 

rating categories were filed with the Commission 

during the Report Period. 

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

ANNUAL REPORT | 3
 

III. Activities Relating 

to NRSROs 

A. ACTIVITIES 

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (“Dodd-Frank 

Act”)8 mandated the creation of OCR. OCR 

is responsible for the oversight of credit 

rating agencies registered with the Commission 

as NRSROs. OCR’s Staff includes professionals 

with expertise in a variety of areas that relate to its 

regulatory mission, such as corporate, municipal, 

and structured debt finance.9 

OCR’s responsibilities—as mandated by the DoddFrank Act—include, among other things, conducting 

an examination of each NRSRO at least annually in 

eight specified review areas.10 Information regarding 

the examinations is included in OCR’s annual 

examination reports.11 

OCR also monitors trends and developments 

affecting the credit rating industry. For example, 

OCR Staff may meet with NRSROs to discuss rating 

and industry developments and with the boards of 

directors of NRSROs to discuss, among other things, 

compliance and oversight matters. OCR Staff also 

may meet with a variety of other market participants, including investors, issuers, regulators, and 

industry organizations, to discuss matters relevant to 

the credit rating industry. 

During the Report Period, OCR Staff continued 

to participate in meetings that involved rating 

agency regulators globally, including those of the 

supervisory colleges that were formed for the 

largest internationally active credit rating agencies. 

The supervisory colleges were formed to enhance 

communication among credit rating agency 

regulators globally with respect to examinations 

of the relevant credit rating agencies.12 During 

the Report Period, each college held an in-person 

meeting and conducted quarterly calls. OCR Staff 

also conducted additional discussions with international regulators, as appropriate. 

In 2019, the Fixed Income Market Structure 

Advisory Committee (“FIMSAC”)13 established a 

Credit Ratings Subcommittee to consider the role of 

credit ratings issued by NRSROs in the corporate 

8 See Pub. L. No. 111-203, 124 Stat. 1376 (2010). 

9 See Section 15E(p)(2) for a description of OCR staffing requirements. 

10 See Section 15E(p)(3). 

11 The examination reports can be found under “Summary Examination Reports” in the “Reports and Studies” section of the 

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

12 See IOSCO, Supervisory Colleges for Credit Rating Agencies, Final Report (July 2013), available at https://www.iosco. 

org/library/pubdocs/pdf/IOSCOPD416.pdf. The SEC serves as chair of the colleges for S&P and MIS, and OCR Staff 

represents the SEC in this regard. The European Securities and Markets Authority serves as chair of the college for Fitch. 

13 FIMSAC was formed in November 2017 to provide the Commission with diverse perspectives on the structure and 

operations of the U.S. fixed income markets, as well as advice and recommendations on matters related to fixed income 

market structure. The FIMSAC’s current charter is available at https://www.sec.gov/spotlight/fixed-income-advisorycommittee/fimsac-charter-nov-2019.pdf. 

4 | OFFICE OF CREDIT RATINGS 
 

bond and municipal securities markets.14 During 

the Report Period, the Credit Ratings Subcommittee made several presentations regarding 

NRSRO competition and compensation models 

at the FIMSAC’s quarterly meetings.15 At the 

FIMSAC meeting on June 1, 2020,16 the FIMSAC 

approved, for the Commission’s consideration, the 

Credit Ratings Subcommittee’s recommendation 

for mitigating potential conflicts of interest in 

credit ratings.17 

In addition, the SEC’s Investor Advisory Committee 

(“IAC”)18 met on July 25, 2019 to discuss the SEC’s 

approach to regulation in areas with limited 

competition, including the credit rating agency 

industry.19 The IAC met on September 19, 2019 

to discuss increased leverage and related SEC 

regulatory implications, including the role of 

NRSROs in the leveraged loan and CLO markets.20 

At the IAC meeting on November 7, 2019,21 SEC 

Chairman Jay Clayton suggested future topics of 

focus for the committee, including questions related 

to credit rating agencies.22 At the IAC meeting on 

May 21, 2020,23 Chairman Clayton suggested 

additional topics of focus for the committee related 

to credit rating agencies.24 

14 Topics that may be considered by the Credit Ratings Subcommittee include, but are not limited to, (1) the use of credit 

ratings by various market participants and the implications of ratings changes for these market participants, (2) the costs 

and benefits of the current model for credit rating issuance, (3) the U.S. regulatory regime for credit rating agencies registered 

as NRSROs, and (4) issuances of unsolicited credit ratings and the publication of commentaries. See https://www.sec.gov/ 

spotlight/fixed-income-advisory-committee/fixed-income-market-structure-advisory-committee-subcommittees.htm. 

15 See Transcript of FIMSAC Meeting, SEC (July 29, 2019), available at https://www.sec.gov/spotlight/fixed-income-advisorycommittee/fimsac-072919transcript.txt; Transcript of FIMSAC Meeting, SEC (Nov. 4, 2019), available at https://www.sec. 

gov/spotlight/fixed-income-advisory-committee/fimsac-110419transcript.txt; Transcript of FIMSAC Meeting, SEC (Feb. 

10, 2020), available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-transcript.pdf. The 

Credit Ratings Subcommittee circulated a discussion document ahead of the February 10, 2020 FIMSAC meeting, which 

is available at https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-021020-crs-working-documentalternate-model-and-potential-initiatives.pdf. 

16 See Transcript of FIMSAC Meeting, SEC (June 1, 2020), available at https://www.sec.gov/spotlight/fixed-income-advisorycommittee/fimsac-060120-transcript.pdf. The Credit Ratings Subcommittee circulated its preliminary recommendation 

ahead of this FIMSAC meeting. See https://www.sec.gov/spotlight/fixed-income-advisory-committee/preliminaryrecommendations-credit-ratings-subcommittee.pdf. 

17 See FIMSAC Recommendation Regarding Ways to Mitigate Conflicts of Interest in Credit Ratings (June 1, 2020), available at 

https://www.sec.gov/spotlight/fixed-income-advisory-committee/fimsac-recommendations-credit-ratings-subcommittee.pdf. 

18 Section 911 of the Dodd-Frank Act established the IAC to advise the Commission on regulatory priorities, the regulation 

of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor 

interests and to promote investor confidence and the integrity of the securities marketplace. The Dodd-Frank Act authorizes 

the IAC to submit findings and recommendations for review and consideration by the Commission. See https://www.sec.gov/ 

spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-charter.pdf. 

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

shtml?document_id=iac072519. 

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

shtml?document_id=iac091919. 

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

shtml?document_id=iac110719. 

22 See Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (Nov. 7, 2019), available at https://www.sec. 

gov/news/public-statement/clayton-remarks-investor-advisory-committee-110719 (noting interest in issues such as reliance 

by retail investors on credit rating agencies, whether credit rating agencies are appropriately disclosing, monitoring and 

managing their conflicts, whether investors are harmed by compensation models of credit rating agencies, and whether 

there are alternative payment models that would better align the interests of rating agencies with those of investors). 

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

shtml?document_id=iac052120. 

24 See Chairman Jay Clayton, Remarks to the SEC Investor Advisory Committee (May 21, 2020), available at https://www.sec. 

gov/news/public-statement/clayton-statement-investor-advisory-committee-meeting-052120 (noting, in addition to reliance 

by retail investors on credit rating agencies, interest in issues such as how much ratings influence today’s marketplace, 

including the potential risks and downstream effects of investment strategies and mandates that reference ratings (and 

consequently take action based on downgrades)). 

ANNUAL REPORT | 5
 

In January 2020, Chairman Clayton asked 

Commission Staff to monitor and, to the extent 

necessary or appropriate, provide guidance and 

other assistance to issuers and other market participants regarding disclosures related to the current 

and potential effects of COVID-19.25 Following the 

Chairman’s January 2020 statement, Commission 

Staff expanded the ongoing outreach efforts with 

credit rating agencies, which included periodically 

communicating with the NRSROs to keep abreast of 

how they are considering the impacts of COVID-19 

on their credit ratings and operations.26 

On April 24, 2020, the Commission announced the 

formation of an internal, interdisciplinary COVID-19 

Market Monitoring Group, the membership of 

which includes the Director of OCR.27 This group 

was formed to assist the Commission and its various 

divisions and offices in (1) developing Commission 

and Staff analyses and actions related to the effects of 

COVID-19 on markets, issuers, and investors, and 

(2) responding to requests for information, analyses, 

and assistance from fellow regulators and other 

public sector partners on market matters arising from 

the effects of COVID-19.28 In addition to OCR’s 

continued participation in the COVID-19 Market 

Monitoring Group, OCR Staff continues to monitor 

the impact of COVID-19 on market matters related 

to the activities of the NRSROs. 

B. COMMISSION ORDERS AND 

RELEASES AND STAFF PUBLICATIONS 

The Commission and the Staff, as applicable, 

issued the following orders, releases, and 

publications relating to NRSROs or credit ratings 

in general from the start of the Report Period to 

November 30, 2020: 

§	Order Instituting Administrative and Ceaseand-Desist Proceedings Pursuant to Sections 

15E(d) and 21C of the Securities Exchange 

Act of 1934, Making Findings, and Imposing 

Remedial Sanctions and a Cease-and-Desist 

Order, Release No. 34-90037 (Sept. 29, 2020).29 

The Commission instituted settled administrative 

proceedings against KBRA concerning violations 

of Rule 17g-8(b)(1) in connection with rating 

CLO Combo Notes. The SEC’s order finds 

that KBRA’s policies and procedures were not 

reasonably designed to ensure that it rated CLO 

Combo Notes in accordance with the terms of 

those securities. 

§	Order Instituting Administrative and Ceaseand-Desist Proceedings Pursuant to Sections 

15E(d) and 21C of the Securities Exchange 

Act of 1934, Making Findings, and Imposing 

Remedial Sanctions and a Cease-and-Desist 

Order, Release No. 34-90036 (Sept. 29, 2020).30 

The Commission instituted settled administrative 

proceedings against KBRA concerning violations 

of Section 15E(c)(3)(A) in connection with rating 

CMBS. The SEC’s order finds that KBRA’s 

25 See Chairman Jay Clayton, Statement on Proposed Amendments to Modernize and Enhance Financial Disclosures; Other 

Ongoing Disclosure Modernization Initiatives; Impact of the Coronavirus; Environmental and Climate-Related Disclosure 

(Jan. 30, 2020), available at https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30. 

26 See SEC Coronavirus (COVID-19) Response: Market Monitoring and Engagement with Market Participants, available at 

https://www.sec.gov/sec-coronavirus-covid-19-response. 

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

news/press-release/2020-95. 

28 See SEC COVID-19 Market Monitoring Group – Update and Current Efforts (May 13, 2020), available at https://www. 

sec.gov/news/public-statement/statement-clayton-kothari-covid-19-2020-05-13. 

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

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

6 | OFFICE OF CREDIT RATINGS 
 

 

internal control structure failed to prevent or 

detect the ambiguity in KBRA’s record of its 

methodology for determining the CMBS ratings, 

such as a comparison of the methodology to the 

analysis used for specific transactions. 

§	Credit Ratings, Procyclicality and Related 

Financial Stability Issues: Select Observations 

(July 15, 2020).31 The Commission’s COVID-19 

Market Monitoring Group, which is discussed 

in Section III.A above, issued this statement 

describing the Group’s exploration of whether 

credit assessments and credit rating agency 

downgrades—and market anticipation of, and 

responses to, those ratings actions—may 

(1) contribute to negative procyclicality in certain 

circumstances, and (2) have implications for 

financial stability. 

§	Order Instituting Administrative and Ceaseand-Desist Proceedings Pursuant to Sections 

15E(d) and 21C of the Securities Exchange 

Act of 1934, Making Findings, and Imposing 

Remedial Sanctions and a Cease-and-Desist 

Order, Release No. 34-88880 (May 15, 2020).32 

The Commission instituted settled administrative 

proceedings against MCR concerning violations 

of Rule 17g-5(c)(8)(i), which prohibits a rating 

agency from issuing or maintaining a credit rating 

where an analyst who participates in determining 

or monitoring credit ratings also participates in 

sales and marketing activity, and Section 15E(h) 

(1), which requires credit rating agencies to 

establish, maintain, and enforce policies and 

procedures reasonably designed to address and 

manage conflicts of interest. 

§	Staff No-Action Letter (Mar. 30, 2020).33 Due 

to COVID-19, EJR submitted a letter to staff 

related to its delay in filing its audited financial 

statements required by Rule 17g-3(a)(1).34 The 

Staff issued a no-action letter to EJR informing it 

that the Staff would not recommend enforcement 

action to the Commission if EJR did not file its 

audited financial statements by March 30, 2020 

as required by Rule 17g-3(a)(1), subject to the 

condition that such financial statements would 

be filed with the Commission no later than 

April 20, 2020. 

§	The SEC’s Office of Credit Ratings and NRSRO 

Regulation: Past, Present, and Future (Feb. 

24, 2020).35 OCR then-Director Jessica Kane 

delivered a speech describing the NRSRO 

regulatory framework and certain regulatory 

requirements; OCR’s responsibility for 

administering this regulatory framework; and 

observed trends in NRSRO compliance. The 

speech referenced the Commission’s August 

2019 rule release36 (discussed in the final bullet 

point under this section of the Report) and 

invited interested parties to provide input on the 

effectiveness of Rule 17g-5(a)(3). 

31 Available at https://www.sec.gov/news/public-statement/covid-19-monitoring-group-2020-07-15. 

32 Available at https://www.sec.gov/litigation/admin/2020/34-88880.pdf. 

33 Available at https://www.sec.gov/ocr/EJRNoActionLetter/EJR_Letter_3-30-20_1.pdf. 

34 See Letter from EJR to OCR Staff (Mar. 30, 2020), available at https://www.sec.gov/ocr/EJRNoAction/EJR-Final_%20 

No-Action_%20Application_3-30-2020.pdf. 

35 OCR Former Director Jessica Kane, Speech, The SEC’s Office of Credit Ratings and NRSRO Regulation: Past, Present, 

and Future (Feb. 24, 2020), available at https://www.sec.gov/news/speech/speech-jessica-kane-2020-02-24. 

36 See Amendments to Rules for Nationally Recognized Statistical Rating Organizations, Release No. 34-86590 (Aug. 7, 

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

pkg/FR-2019-08-14/pdf/2019-17218.pdf. 

ANNUAL REPORT | 7
 

§	2019 Summary Report of Commission Staff’s 

Examinations of Each Nationally Recognized 

Statistical Rating Organization, dated January 

2020, as required under Section 15E(p)(3)(C).37 

The report summarizes essential findings of the 

examinations conducted by Staff under Section 

15E(p)(3)(C). 

§	Annual Report on Nationally Recognized 

Statistical Rating Organizations, dated January 

2020 (“January 2020 Annual Report”), as 

required by Section 6 of the Rating Agency 

Act.38 The Annual Report addresses the matters 

described in the first paragraph under Section I 

of this Report. 

§	2019 Adopting Release.

39 The Commission 

adopted an amendment to Rule 17g-5(a)(3) that 

provides for an exemption from the rule with 

respect to credit ratings for certain structured 

finance products where the issuer is a non-U.S. 

person and the NRSRO has a reasonable basis to 

conclude that the structured finance product 

will be offered and sold exclusively outside the 

United States. In the 2019 Adopting Release, the 

Commission directed the Staff to further evaluate 

the effectiveness of Rule 17g-5(a)(3) with respect 

to ratings of structured finance products that 

are not eligible for relief under the exemption. 

The Commission also adopted conforming 

amendments to similar exemptions in Rule 

17g-7(a) and Rule 15Ga-2. 

37 Available at https://www.sec.gov/files/nrsro-summary-report-2019.pdf. 

38 Available at https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf. 

39 84 FR at 40250. 

8 | OFFICE OF CREDIT RATINGS 
 

 

IV. Competition 

A. SELECT NRSRO STATISTICS 

Sections 1 through 3 below summarize and 

discuss certain information reported by 

NRSROs on Form NRSRO or pursuant 

to Rule 17g-3 that provides insight into 

the state of competition among NRSROs. While 

this information indicates that the larger NRSROs 

continue to account for the highest percentages of 

outstanding ratings, other information suggests that 

smaller NRSROs have gained ratings share in certain 

asset classes.40 

1. NRSRO Credit Ratings Outstanding 

Each NRSRO annually reports the number of credit 

ratings outstanding, as of the end of the preceding 

calendar year, in each rating category for which it is 

registered.41 This information, for the calendar year 

ending December 31, 2019, is summarized in Charts 

2 through 5 below and can be useful in determining 

the breadth of an NRSRO’s coverage with respect 

to issuers, obligors, and securities or money market 

instruments within a particular rating category. 

Chart 2 depicts the number of credit ratings each 

NRSRO had outstanding in each rating category 

for which it was registered as of December 31, 

2019. Chart 3 shows the percentage of credit ratings 

each NRSRO had outstanding across all rating 

categories and also breaks out the percentages 

for each NRSRO in each of the rating categories. 

Chart 4 illustrates the relative size of each rating 

category based on the aggregate number of ratings 

reported outstanding by all NRSROs. Chart 5 

depicts the percentage of ratings each NRSRO had 

outstanding across all rating categories other than 

the government securities category. 

Comparing the number of ratings outstanding for 

established NRSROs and newer NRSROs may not 

provide as comprehensive a picture of the state of 

competition as comparing the number of ratings 

issued by such NRSROs in a given period. Certain 

NRSROs (particularly the larger NRSROs) have 

a longer history of issuing ratings and their ratings 

include those for debt obligations and obligors that 

were rated well before the establishment of the 

newer entrants.42 Consequently, the information 

described in Section IV.B of this Report (relating 

to recent market share developments in the assetbacked securities rating category) may provide 

40 As discussed in Section IV.B.1 of this Report, information available on the websites of Commercial Mortgage Alert 

(https://www.cmalert.com/) and Asset-Backed Alert (https://www.abalert.com/) regarding NRSRO market shares in the 

asset-backed securities category indicates that some of the smaller NRSROs have developed significant market shares in 

such rating category over the past few years. In addition, Section IV.B.2 of this Report provides examples of certain asset 

classes in which it has been reported that smaller NRSROs have gained market share. 

41 Annual certifications on Form NRSRO must be filed with the Commission on EDGAR pursuant to Rule 17g-1(f) and 

made publicly available without cost on each NRSRO’s website pursuant to Rule 17g-1(i). The number of outstanding 

credit ratings for each rating category for which an NRSRO is registered is reported on Item 7A of Form NRSRO. 

42 The ratings counts disclosed on Item 7A of Form NRSRO include outstanding credit ratings, regardless of when they were 

issued. As a result, the ratings counts of the more established NRSROs may include credit ratings that were issued before 

the newer entrants began issuing credit ratings. These earlier ratings will continue to be included in the disclosed ratings 

counts until the credit ratings are withdrawn, either because the rated securities have been repaid or otherwise. Because 

outstanding ratings are included in the ratings counts, historical results factor significantly into the disclosed number of 

ratings, making it more difficult to discern current-year trends and identify gains achieved by the newer entrants. 

ANNUAL REPORT | 9
 

additional insight regarding how newer entrants are 

competing with more established rating agencies, 

specifically in the asset-backed securities rating 

category. 

There are additional limitations to assessing the 

state of competition in each rating category and in 

the aggregate based on the number of outstanding 

ratings. For instance, some NRSROs have pursued 

business strategies to specialize in particular rating 

categories or sub-categories43 and may not desire 

to issue ratings in certain of the other NRSRO 

rating categories. Also, the reported information 

does not reflect any credit ratings being issued by 

NRSROs in rating categories in which they are not 

registered with the Commission, nor does it reflect 

ratings issued by an affiliate of an NRSRO unless 

the affiliate is identified as a credit rating affiliate on 

Item 3 of Form NRSRO. 

Further, when reporting its outstanding ratings, 

each NRSRO makes its own determination of the 

applicable rating category into which each of its 

ratings falls. The classification of ratings into the five 

rating categories is not necessarily consistent across 

NRSROs. In addition, to the extent NRSROs have 

adjusted their ratings count disclosures in accordance 

with the amended Instructions to Form NRSRO, 

it may be more difficult to draw comparisons to 

ratings counts disclosed in prior years.44 

Chart 2 provides the number of outstanding credit 

ratings reported by each NRSRO in its annual certification for the calendar year ending December 31, 

2019, in each of the five rating categories identified 

in Section 3(a)(62) for which the NRSRO is registered, as applicable. 

Chart 3 displays the percentage of each NRSRO’s 

outstanding credit ratings of the total outstanding 

credit ratings of all NRSROs, for each rating 

category in which the NRSRO was registered, as 

reported by each NRSRO in its annual certification 

for the calendar year ending December 31, 2019.45 

The larger NRSROs account for 95.1% of all 

the ratings outstanding as of December 31, 

2019—slightly lower than their 95.4% share as 

of December 31, 2018.46 The share of outstanding 

credit ratings of the larger NRSROs decreased in 

three of the five categories, most significantly in the 

asset-backed securities category, which decreased by 

2.3 percentage points. 

Charts 2 and 3 also show that AMB, one of the 

smaller NRSROs, had the most credit ratings 

outstanding in the insurance category. In each of the 

past six years, AMB reported that it had the most 

credit ratings outstanding in the insurance category.47 

43 For example, AMB has traditionally focused on rating insurance companies and their affiliates. 

44 Effective January 1, 2015, Item 7A of Form NRSRO and the corresponding Instructions were amended to clarify the 

manner in which the number of outstanding credit ratings should be calculated and presented. The clarifying amendments 

were designed to help ensure that disclosures on Item 7A of Form NRSRO are consistent across NRSROs. The change 

in Instructions may have caused some NRSROs to modify the way they count ratings for purposes of Item 7A of Form 

NRSRO, which may affect comparisons to disclosures made in prior years. See Nationally Recognized Statistical Rating 

Organizations, Release No. 34-72936 (Aug. 27, 2014), 79 FR 55077, 55220-22 (Sept. 15, 2014) (“2014 Adopting 

Release”), available at https://www.govinfo.gov/content/pkg/FR-2014-09-15/pdf/2014-20890.pdf (discussing the clarifying 

amendments to Item 7A of Form NRSRO). 

45 For example, according to Chart 2, AMB reported that it had 7,171 insurance company credit ratings, and the total of 

the credit ratings in that category reported by all NRSROs was 20,990. Therefore, the percentage of NRSRO insurance 

company ratings attributable to AMB was approximately 34.2% (i.e., 7,171 divided by 20,990, expressed as a percentage), 

as shown on Chart 3. 

46 In 2007, the year when NRSROs began reporting outstanding ratings on Form NRSRO, these three NRSROs accounted 

for 98.8% of all outstanding ratings. 

47 See Annual Reports for prior years, which can be found under “Annual Reports to Congress” in the “Reports and Studies” 

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

10 | OFFICE OF CREDIT RATINGS 
 

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

NRSRO Financial 

Institutions 

Insurance 

Companies 

Corporate 

Issuers 

Asset-Backed 

Securities 

Government 

Securities Total Ratings 

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

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

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

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

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

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

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

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

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

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

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

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

Chart 3: Percentage by Rating Category of Each NRSRO’s Outstanding Credit Ratings of the Total 

Outstanding Credit Ratings of all NRSROs as of December 31, 2019* 

NRSRO Financial 

Institutions 

Insurance 

Companies 

Corporate 

Issuers 

Asset-Backed 

Securities 

Government 

Securities Total Ratings 

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

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

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

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

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

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

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

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

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

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

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

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

ANNUAL REPORT | 11
 

Chart 4: Breakdown of Ratings Reported Chart 5: Breakdown of Non-Government 

Outstanding as of December 31, 2019* Securities Ratings Reported Outstanding as of 

December 31, 2019* 

79.0% 

7.0% 

5.8% 1.0% 

7.3% 

Government Securities 79.0% 

Financial Institutions 7.0% 

Insurance Companies 1.0% 

Corporate Issuers 5.8% 

Asset-Backed Securities 7.3% 

* Percentages have been rounded to the nearest 

one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 

calendar year, Item 7A on Form NRSRO. 

Chart 4 depicts the percentages of outstanding 

credit ratings attributable to each rating category, 

as reported by the NRSROs in their annual 

certifications for the calendar year ending 

December 31, 2019. 

As illustrated by Chart 4, as of December 31, 2019, 

the largest proportion of the aggregate credit ratings 

reported to be outstanding were in the government 

securities category, which may be attributable to the 

large number of government bond issuers and their 

multiple debt offerings. The government securities 

category accounted for 79.0% of the total number 

of credit ratings reported across all categories and, 

as shown on Chart 3, is also the most concentrated 

rating category, with the larger NRSROs accounting 

for 98.7% of all outstanding government ratings. 

0.9% 

0.2% 

1.8% 

34.3% 

26.6% 

3.2% 

8.3% 

4.0% 

20.7% 

HR 0.2% 

AMB 1.8% 

S&P 34.3% 

JCR 0.9% 

DBRS 8.3% KBRA 3.2% 

EJR 4.0% MIS 26.6% 

Fitch 20.7% 

* Percentages have been rounded to the nearest 

one-tenth of one percent. 

Source: NRSRO annual certifications for the 2019 

calendar year, Item 7A on Form NRSRO. 

Chart 5 depicts the percentages of the credit 

ratings outstanding that are attributable to each 

NRSRO over all the rating categories other than the 

government securities category, as reported by each 

NRSRO in its annual certification for the calendar 

year ending December 31, 2019. 

A comparison of Chart 5 to Chart 3 (which shows 

each NRSRO’s share of outstanding ratings over 

all the rating categories, including government 

securities) illustrates that there is less concentration 

in the non-government securities rating categories. 

S&P’s and MIS’s percentage share of all outstanding 

ratings declines by 15.8 and 5.4 percentage points, 

respectively, when government securities are 

excluded. Fitch’s percentage share of outstanding 

ratings, on the other hand, increases by 7.7 

percentage points when government securities are 

12 | OFFICE OF CREDIT RATINGS 
 

excluded. The percentage share for all the remaining 

NRSROs also increases when government securities 

are excluded. 

Further, when government securities are included in 

the total calculation, each of the smaller NRSROs, 

except for DBRS, has less than 1.0% of all 

outstanding ratings, making it difficult to assess their 

relative rating shares. When government securities 

are excluded, a clearer picture of the relative 

percentage shares of the smaller NRSROs in the 

categories in which they are active can be observed, 

as illustrated in Chart 5. The percentage share of 

each smaller NRSRO for all rating categories other 

than government securities as of December 31, 

2019 did not change significantly compared to their 

percentage share as of December 31, 2018.48 

As discussed above, Charts 2 through 5 reflect the 

number and percentages, respectively, of credit 

ratings outstanding as of December 31, 2019, which 

may include credit ratings that were issued years 

ago. As a result, the measure may not be indicative 

of the current market position of each NRSRO 

with respect to newly issued credit ratings. For a 

discussion of recent market share developments in 

the asset-backed securities rating category and other 

developments that could impact NRSRO market 

share, see Section IV.B of this Report. 

2. NRSRO Analytical Staffing Levels 

Chart 6 reports the number of credit analysts 

(including credit analyst supervisors) and the 

number of credit analyst supervisors employed by 

each of the NRSROs, as reported on Exhibit 8 to 

Form NRSRO.49 

Chart 6: NRSRO Credit Analysts 

and Credit Analyst Supervisors 

NRSRO 

Credit Analysts 

(Including Credit 

Analyst Supervisors) 

Credit Analyst 

Supervisors 

AMB 154 55 

DBRS 475 110 

EJR 23 12 

Fitch 1,277 312 

HR 52 10 

JCR 62 30 

KBRA 172 48 

MIS 1,732 278 

S&P 1,559 119 

Total 5,506 974 

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

NRSRO’s annual certification for the 2019 calendar 

year filed on or before March 30, 2020. 

The larger NRSROs report employing 4,568 credit 

analysts (including supervisors), which is approximately 83.0% of the total number employed by all 

of the NRSROs. Although the smaller NRSROs in 

the aggregate employ only approximately 17.0% 

of all credit analysts employed by NRSROs, this 

percentage has increased steadily in recent years.50 

During this time, some of the smaller NRSROs have 

reported significant increases in their analytical staff. 

Between the 2018 and 2019 calendar years, the 

number of credit analysts (including credit analyst 

supervisors) employed by smaller NRSROs, in the 

aggregate, increased 13.7%, compared to an increase 

of 0.6% at the larger NRSROs, in the aggregate. 

48 A comparison of Chart 5 in this Report with Chart 4 in Section IV.A.1 of the January 2020 Annual Report (available at 

https://www.sec.gov/files/2019-annual-report-on-nrsros.pdf) shows that, except for DBRS, each smaller NRSRO’s total 

non-government market share as of December 31, 2019 remained constant or increased modestly (the largest increase was 

0.4% by KBRA) compared to the market shares as of December 31, 2018. 

49 Effective January 1, 2015, the Instructions for Exhibit 8 to Form NRSRO were amended to clarify that NRSROs must 

include credit analyst supervisors in the total number of credit analysts disclosed on Exhibit 8. This amendment was 

designed to enhance consistency of the disclosures on Exhibit 8 of Form NRSRO. See 2014 Adopting Release, 79 FR at 

55222 (discussing the clarifying amendments to Exhibit 8 of Form NRSRO). 

50 Based on reports by the NRSROs on their annual certifications for the applicable calendar year, the smaller NRSROs 

employed approximately 11.4% of all NRSRO analysts in 2014, 12.8% of all NRSRO analysts in 2015, 14.6% of all 

NRSRO analysts in 2016, 15.2% of all NRSRO analysts in 2017, and 15.4% of all NRSRO analysts in 2018. 

ANNUAL REPORT | 13
 

 

3. NRSRO Revenue 

Chart 7 shows the percentage of total NRSRO 

revenues since 2016 that were accounted for by the 

larger NRSROs in the aggregate and by the smaller 

NRSROs in the aggregate.51 The percentage of 

aggregate NRSRO revenue reported by the larger 

NRSROs has gradually declined over this time 

period and the percentage of total revenue reported 

by the smaller NRSROs has correspondingly 

gradually increased. 

Chart 7: NRSRO Revenue Information: 

Fiscal Year Percentage of Total Reported 

NRSRO Revenue 

2019 2018 2017 2016 

Larger 

NRSROs 93.3% 93.5% 94.1% 94.4% 

Smaller 

NRSROs 6.7% 6.5% 5.9% 5.6% 

Total 100.0% 100.0% 100.0% 100.0% 

Source: Financial reports filed with the Commission 

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

2016 through 2019. For the preparation of this 

Report, if an NRSRO reported revenue in a foreign 

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

using the average exchange rate over all U.S. 

banking days in the fiscal year of such NRSRO. 

Further revenue information is available for 

NRSROs that are owned, in whole or in part, by 

public companies. The following information is from 

the 2019 annual reports of public companies with an 

ownership interest in an NRSRO: 

§	Moody’s Corporation, which is MIS’s parent 

company, reported a 6% increase in external 

revenue at MIS compared to 2018 results. 

The increase, according to the report, reflects 

higher revenue from rating corporate debt 

(both investment-grade and high-yield) resulting 

from both higher volumes of rated issuances 

reflecting favorable market conditions and 

favorable product mix. The report notes that the 

increase in revenue at MIS was partially offset 

by a decline in activity in bank loans and the 

CLO asset class primarily resulting from higher 

borrowing costs and shift in investor demand 

to fixed-rate instruments. The corporate finance 

group, financial institutions group, and public, 

project and infrastructure finance group of MIS 

had an increase in revenue compared to 2018 

results.52 

§	S&P Global Inc. (“S&P Global”), which is 

S&P’s parent company, indicated that revenue 

at S&P increased by 8% compared to its 

2018 results, due to an increase in transaction 

revenue. S&P Global attributed the increase 

in S&P’s revenue to an increase in corporate 

bond ratings revenue primarily driven by higher 

corporate bond issuance in the U.S. and Europe, 

which was partially offset by lower bank loan 

ratings revenue driven by reduced U.S. issuance 

volumes. The report also noted an increase in 

public finance revenue from increased issuance 

contributed to transaction revenue growth.53 

51 Under Rule 17g-3(a)(3), each NRSRO is required to file annually with the Commission an unaudited report providing 

revenue information, including revenue from determining and maintaining credit ratings, revenue from subscribers, revenue 

from granting licenses or rights to publish credit ratings, and revenue from other services and products. These reports are 

not required to be made publicly available by the NRSROs 

52 See Moody’s Corporation, Annual Report on Form 10-K for the year ended December 31, 2019, available at 

https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000005/mco-20191231.htm. 

53 See S&P Global, Annual Report on Form 10-K for the year ended December 31, 2019, available at 

https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000055/spgi-20191231x10k.htm. 

14 | OFFICE OF CREDIT RATINGS 
 

§	Morningstar, Inc. indicated that NRSRO revenue 

for the twelve months ended December 31, 2018 

reflects MCR; NRSRO revenue for the first six 

months of 2019 includes revenue from MCR; 

and NRSRO revenue for the third and fourth 

quarters of 2019 includes revenue from DBRS, 

the newly combined credit ratings operations. 

For the six months ended December 31, 2019, 

approximately 63% of the revenue generated by 

DBRS was derived from one-time, transactionbased fees driven by its provision of ratings on 

newly-issued securities; whereas the remainder 

can be classified as transaction-related, with 

recurring annual fees tied to surveillance, credit 

research, or other services. The combination of 

pre-integration DBRS and MCR’s U.S.-based 

credit ratings operations in 2019 makes it 

difficult to ascribe the origin of revenue growth 

to either entity. In 2019, Morningstar, Inc.’s 

consolidated revenue rose $159.1 million, or 

15.6%. DBRS contributed $91.3 million of 

revenue growth during 2019.54 

Recent regulatory filings also show increases in 

revenue at MIS and S&P in the first half of 2020. 

Moody’s Corporation reported a 23% increase 

in MIS external revenue in the first half of 2020, 

as compared to the first half of 2019, due to 

higher investment-grade rated issuance volumes 

as corporate issuers bolstered liquidity positions in 

response to COVID-19 uncertainties coupled with 

strong speculative-grade issuance despite a severe 

market disruption late in the first quarter.55 S&P 

Global reported a 22% increase in S&P revenue in 

the first half of 2020, as compared to the first half 

of 2019, primarily due to an increase in transaction 

revenue. S&P Global attributed the increased 

revenue to an increase in corporate bond ratings 

revenue primarily driven by higher corporate bond 

issuance in the U.S. mainly resulting from historically low borrowing costs and central bank lending 

actions that initially were announced at the end of 

the first quarter of 2020, which was partially offset 

by a decrease in bank loan ratings revenue.56 

Morningstar, Inc. indicated that NRSRO revenue for 

the six months ended June 30, 2019 reflects MCR; 

NRSRO revenue for the six months ended June 30, 

2020 reflects DBRS, the combined credit ratings 

operations. The combination of pre-integration 

DBRS and MCR’s U.S.-based credit ratings operations in 2019 makes it difficult to ascribe the origin 

of revenue growth to either entity. Morningstar, 

Inc. reported that many new issuance segments 

of the transaction-based credit rating business in 

both Europe and the U.S. slowed or paused during 

the second quarter as the pandemic persisted. 

However, DBRS benefited from record corporate 

issuance volumes in Canada, as many Canadian 

investment grade issuers accelerated their full year 

issuance plans into the second quarter. In the first six 

months of 2020, Morningstar, Inc.’s consolidated 

revenue increased 19.7% to $327.9 million. DBRS 

contributed $76.3 million of revenue growth during 

the first six months of 2020.57 

54 See Morningstar, Inc., Annual Report on Form 10-K for the year ended December 31, 2019, available at 

https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000041/morn10k12312019.htm. 

55 See Moody’s Corporation, Quarterly Report on Form 10-Q for the period ended June 30, 2020, available at 

https://www.sec.gov/Archives/edgar/data/0001059556/000105955620000019/mco-20200630.htm. 

56 See S&P Global, Quarterly Report on Form 10-Q, for the period ended June 30, 2020, available at 

https://www.sec.gov/Archives/edgar/data/0000064040/000006404020000144/spgi-20200630.htm. 

57 See Morningstar, Inc., Quarterly Report on Form 10-Q for the period ended June 30, 2020, available at 

https://www.sec.gov/Archives/edgar/data/0001289419/000128941920000161/morn-20200630.htm. 

ANNUAL REPORT | 15
 

 

B. RECENT DEVELOPMENTS IN THE 

STATE OF COMPETITION AMONG 

NRSROs 

1. Market Share Observations in the 

Asset-Backed Securities Rating Category 

As noted in Section IV.A.1 of this Report, the 

number of ratings recently issued by NRSROs 

may give a clearer picture of competition than 

the number of ratings each NRSRO currently has 

outstanding. For example, Chart 3 indicates that, 

as of December 31, 2019, the smaller NRSROs 

collectively have 22.6% of the ratings outstanding in 

the asset-backed securities rating category. However, 

the market share data discussed in this Section 

IV.B show that higher market share percentages 

have been obtained by smaller NRSROs in ratings 

issuance with respect to certain types of asset-backed 

securities. This market share data continues the 

growth trend the Staff has observed since the 2012 

Annual Report for some smaller NRSROs in the 

asset-backed securities rating category. 

Sections (a) and (b) below discuss NRSRO market 

share information with respect to certain assetbacked securities, as reported on the Commercial 

Mortgage Alert and Asset-Backed Alert websites.58 

Commercial Mortgage Alert shares information on 

one category of asset-backed securities: CMBS.59 

Asset-Backed Alert reports NRSRO market share 

information on three categories of asset-backed 

securities: (i) ABS;60 (ii) MBS;61 and (iii) CLO.62 

(a) CMBS 

Charts 8 through 11 provide information concerning 

U.S.63 CMBS ratings by NRSROs,64 as reported in 

the Commercial Mortgage Alert. NRSRO market 

share varies between the conduit CMBS and single58 See Commercial Mortgage Alert website, available at https://www.cmalert.com/ and Asset-Backed Alert website, available 

at https://www.abalert.com/. The information in Charts 8 through 11 is based on the Commercial Mortgage Alert website 

as of September 17, 2020, and the information in Charts 12 through 14 is based on the Asset-Backed Alert website as of 

September 17, 2020. Although the information available on these websites may provide insight into recent developments 

regarding the state of competition among NRSROs in the asset-backed securities rating category, it has certain limitations. 

For instance, the information treats each transaction as one undivided whole. An NRSRO is counted as having rated a 

transaction, and the aggregate amount of securities issued, even if the NRSRO rated only a portion of it. 

59 The “CMBS” category is comprised of transactions collateralized by mortgages or leases on commercial or multi-family 

income-producing properties (excluding commercial real estate collateralized debt obligations). See Commercial Mortgage 

Alert website, available at https://www.cmalert.com/. 

60 The “ABS” category is comprised of securities that are collateralized by assets other than the following: CMBS; MBS; 

Fannie Mae and Freddie Mac issues (other than risk transfer transactions); issuances by municipalities; tax exempt issues; 

issues that are fully retained by an affiliate of the deal sponsor; commercial paper and other continuously offered securities 

such as medium-term notes; CLOs and other collateralized debt obligations; and refinancings of previously offered 

securities. See Asset-Backed Alert website, available at https://www.abalert.com/. 

61 The “MBS” category is comprised of securities secured by U.S. first-lien mortgages on residential properties (excluding 

Fannie Mae and Freddie Mac issues, securities secured by non-performing or re-performing mortgages, subprime 

mortgages, or mortgages financing single-family rental businesses, and refinancings of previously offered securities). See id. 

62 The “CLO” category is comprised of arbitrage collateralized loan obligations secured by broadly syndicated corporate 

loans and middle market collateralized loan obligations secured by loans to small to medium sized enterprises. See id. 

63 References to “U.S.” CMBS, MBS, ABS, and CLO issuance and market shares in this Section IV.B.1 and Section IV.B.2 

reflect securities issued for sale primarily in the U.S., which include securities issued publicly and those issued under Rule 

144A under the Securities Act of 1933, as amended (the “Securities Act”). See Asset-Backed Alert website, available at 

https://www.abalert.com/; Commercial Mortgage Alert website, available at https://www.cmalert.com/. 

64 For purposes of Charts 8 through 11, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated 

and presented for DBRS. This includes information for all of 2018 and 2019. Please refer to the January 2020 and 

December 2018 Annual Reports for information for pre-integration DBRS and MCR. 

16 | OFFICE OF CREDIT RATINGS 
 

borrower CMBS segments,65 the two segments 

that account for most of the non-agency66 U.S. 

CMBS transactions rated by NRSROs. The charts 

include reported market share information for total 

non-agency U.S. CMBS transactions,67 U.S. conduit 

CMBS transactions, U.S. single-borrower CMBS 

transactions, and agency CMBS transactions68 for 

calendar year 2018, calendar year 2019, and the first 

half of calendar year 2020. 

Charts 8 through 10 show that in 2018, 2019, and 

the first half of 2020 the larger NRSROs generally 

obtained the highest market shares in rating 

non-agency U.S. CMBS transactions, but smaller 

NRSROs have achieved significant market shares as 

well. In the first half of 2020, each NRSRO active 

in rating non-agency U.S. CMBS had market shares 

greater than 34.9%. 

S&P has continued to gain market share in the U.S. 

conduit CMBS segment. S&P had the second-highest 

market share in this segment during 2019 and 

the first half of 2020, rating more than half of the 

transactions over that period. KBRA had the secondhighest market share in the U.S. conduit CMBS 

segment in 2018, and the third-highest ranking in 

2019 and the first half of 2020. In each of 2017, 

2018, 2019, and the first half of 2020, KBRA has 

rated more than half of these transactions. 

The relative size (proportionate to total U.S. CMBS 

issuance) of the U.S. single-borrower segment had 

been almost half of the non-agency U.S. CMBS 

transactions for the past two years. However, in 

the first half of 2020, due to a decline in issuance, 

the U.S. single-borrower segment accounted for 

about a third of all non-agency U.S. CMBS transactions. KBRA gained market share in this segment, 

achieving the second highest market share in the 

first half of 2020, albeit rating only three out of the 

twenty transactions in the segment.69 

As illustrated in Chart 11, smaller NRSROs gained 

market share in the agency CMBS segment. In 2019 

and the first half of 2020, KBRA and DBRS had the 

second and third-highest market shares, respectively, 

each rating approximately half of the agency CMBS 

transactions. 

65 The term “conduit” refers to a financial intermediary that functions as a link, or conduit, between the lender(s) originating 

loans and the ultimate investor(s). The conduit makes loans or purchases loans from third party correspondents under 

standardized underwriting parameters and once sufficient volume has accumulated, pools the loans for sale to investors 

in the CMBS market. See https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/Glossary%20 

Revised%202014%20-Update.pdf. In contrast, a single-borrower transaction includes commercial mortgage loans made to 

a single-borrower. 

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

“Agency” CMBS generally refers to CMBS that are issued or guaranteed by such entities. 

67 Total U.S. CMBS transactions include conduit CMBS, single-borrower CMBS, and other types of CMBS, such as 

distressed/non-performing CMBS transactions and re-securitizations of CMBS transactions. 

68 Only agency CMBS transactions with a rating from one or more NRSROs are included for determining NRSRO market 

share in the agency CMBS category. See Commercial Mortgage Alert website, available at https://www.cmalert.com/. 

69 The coronavirus pandemic contributed to a slowdown in the issuance of CMBS transactions in the first half of 2020, which 

impacted the NRSROs’ market shares in certain CMBS segments. In particular, the NRSROs’ market shares in the U.S. 

single-borrower segment were skewed because one transaction accounted for a third of the volume in the first half of 2020. 

See Commercial Mortgage Alert, July 17, 2020. 

ANNUAL REPORT | 17
 

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

in 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 

Rank Issuance deals Share Issuance deals Share Issuance deals Share 

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

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

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

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

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

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

Total 

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

Market 

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

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

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

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

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

entity, DBRS. See note 64. 

Chart 9: Rating Agency Market Share for U.S. Conduit CMB

in 2018, 2019, and First Half of 2020* 

S Issued 

1H-2020 

Rank 

NRSRO 1H-2020 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2019 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2018 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

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

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

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

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

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

Total 

Rated 

Market 

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

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

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

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

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

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

entity, DBRS. See note 64. 

18 | OFFICE OF CREDIT RATINGS 
 

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

in 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 

Rank Issuance deals Share Issuance deals Share Issuance deals Share 

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

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

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

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

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

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

Total 

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

Market 

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

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

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

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

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

entity, DBRS. See note 64. 

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

1H-2020 

Rank 

NRSRO 1H-2020 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2019 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2018 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

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

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

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

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

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

Total 

Rated 

Market 

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

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

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

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

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

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

entity, DBRS. See note 64. 

ANNUAL REPORT | 19
 

(b) ABS/MBS/CLO 

Charts 12 through 14 provide information 

concerning U.S. ABS, U.S. MBS, and U.S. CLO 

ratings by NRSROs,70 as reported in the AssetBacked Alert. The charts include reported market 

share information for these transactions for calendar 

years 2018, calendar year 2019, and the first half of 

calendar year 2020. 

Chart 12 shows that smaller NRSROs, in particular 

DBRS and KBRA, have built and maintained 

significant U.S. ABS rating market shares.71 DBRS 

has consistently attained a marketshare of over 

20% in each of 2018, 2019, and the first half of 

2020, and KBRA has maintained a market share of 

approximately 17.5% during the same time period.72 

Chart 13 shows that for the U.S. MBS market, 

KBRA obtained the third-highest market share in 

2018, and then the second-highest market shares in 

2019 and the first half of 2020. DBRS also obtained 

a large ratings share of this market, maintaining a 

market share of over 30% in 2018, 2019, and the 

first half of 2020. 

Chart 14 shows that the larger NRSROs have the 

highest market shares in the U.S. CLO segment. 

However, DBRS has attained some market share in 

the U.S. CLO segment, and KBRA began rating such 

transactions in 2019.73 

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

1H-2020 

Rank 

NRSRO 1H-2020 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2019 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2018 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

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

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

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

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

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

Total 

Rated 

Market 

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

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

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

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

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

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

See note 70. 

70 For purposes of Charts 12 through 14, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated 

and presented for DBRS. This includes information for all of 2018 and 2019. Please refer to the January 2020 and 

December 2018 Annual Reports for information for pre-integration DBRS and MCR. 

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

success in gaining market share. 

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

Alert, July 3, 2020. 

73 COVID-19 contributed to a slowdown in the issuance of CLO transactions in the first half of 2020, which impacted the 

NRSROs’ market shares in this sector. See Asset-Backed Alert, July 10, 2020; Asset-Backed Alert, July 3, 2020. 

20 | OFFICE OF CREDIT RATINGS 
 

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

1H-2020 

Rank 

NRSRO 1H-2020 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2019 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

2018 

Issuance 

($Mil.) 

No. of 

deals 

Market 

Share 

(%) 

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

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

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

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

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

Total 

Rated 

Market 

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

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

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

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

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

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

See note 70. 

Chart 14: Rating Agency Market Shares for 

U.S. CLO Issued in First Half of 2018, 2019, and First Half of 2020* 

1H-2020 NRSRO 1H-2020 No. of Market 2019 No. of Market 2018 No. of Market 

Rank Issuance deals Share Issuance deals Share Issuance deals Share 

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

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

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

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

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

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

Total 

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

Market 

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

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

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

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

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

See note 70. 

ANNUAL REPORT | 21
 

2. Other Asset-Backed Securities Market 

Share Observations74

As illustrated above, some of the smaller NRSROs 

have gained market share in the asset-backed 

securities rating category. In particular, the smaller 

NRSROs have gained market share rating assetbacked securities backed by discrete asset types, 

especially newer or esoteric assets. 

For instance, smaller NRSROs are significant 

raters of securities backed by unsecured consumer 

loans, including consumer loans originated through 

marketplace lending platforms. KBRA and DBRS 

had the two highest market shares in this category 

during the Report Period, both rating approximately 57.8% of the transactions priced during 

such period.75 

Another example of market share gains achieved 

by smaller NRSROs in discrete asset classes 

is KBRA’s rating of securitizations backed by 

aircraft-lease receivables. KBRA rated each of the 

fifteen aircraft-lease receivables transactions (with 

an aggregate principal amount of $7.6 billion) 

that priced during the Report Period.76 KBRA has 

rated each aircraft-lease receivables transaction 

(fifty-seven in total) issued from December 2015 

through the end of the Report Period.77 

KBRA was also active rating whole-business securitizations during the Report Period, rating 88.2% of 

the issuance amount of such transactions.78 KBRA’s 

market share in the whole-business category is 

further demonstrated when measured by the 

number of transactions rather than dollar amounts 

of issuance; KBRA rated nine of the eleven transactions priced during the Report Period.79 

Smaller NRSROs have also been able to gain 

market share in rating more traditional types of 

asset-backed securities. During the Report Period, 

DBRS rated more traditional types of assetbacked securities (aside from the MBS and CMBS 

categories) than the other smaller NRSROs. For 

example, DBRS rated 64.9% of the transactions 

backed by student loans that priced during the 

Report Period.80 DBRS also rated a sizable minority 

of one of the larger asset-backed securities asset 

classes—i.e., credit card transactions.81 DBRS rated 

23.6% of the credit card asset-backed securities 

priced during the Report Period.82 

DBRS has also been able to gain market share in 

auto-related asset-backed securities. During the 

Report Period, DBRS rated 40.9% of the auto-fleet 

lease transactions, 30.3% of the subprime auto loan 

transactions, 13.7% of the prime auto loan trans74 Unless noted otherwise, all market share percentages in this Section IV.B.2 are based on dollar amounts of issuance. The 

information in this Section IV.B.2 is from the Asset-Backed Alert database as of July 10, 2020. For purposes of this section, 

the information for pre-integration DBRS and MCR were aggregated to reflect their current operations as the combined 

entity, DBRS. See supra text accompanying note 70. 

75 See Asset-Backed Alert database. The Asset-Backed Alert database indicates that fifty-two unsecured consumer loan 

transactions totaling $17.1 billion priced during the Report Period. 

76 See id. 

77 See id. 

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

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

of the transactions during the Report Period. 

79 See id. 

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

the Report Period. 

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

Period. 

82 See Asset-Backed Alert database. 

22 | OFFICE OF CREDIT RATINGS 
 

 

actions, and 3.2% of the auto lease transactions that 

priced during the Report Period.83 KBRA has also 

established a market share presence in some of these 

auto-related asset-backed security categories, rating 

32.8% of the subprime auto loan transactions and 

1.0% of the prime auto loan transactions during the 

Report Period.84 

Smaller NRSROs have also achieved notable market 

share in certain types of residential mortgagebacked securities not included in Chart 13. DBRS 

rated all but two of the transactions backed by 

non-performing or re-performing mortgages that 

priced in the Report Period.85 Additionally, DBRS 

and KBRA were active rating securities backed by 

subprime mortgages and risk transfer securities 

during the Report Period. For securities backed 

by subprime mortgages, DBRS rated 54.9% and 

KBRA rated 38.2%.86 For risk transfer securities, 

DBRS rated 51.4% and KBRA rated 31.8%.87 

C. BARRIERS TO ENTRY 

Barriers to entry continue to exist in the credit 

ratings industry, presenting competitive challenges 

for the smaller NRSROs. 

One such potential barrier that has been raised 

by certain smaller NRSROs are the investment 

management contracts of some institutional fund 

managers and the investment guidelines of some 

fixed income mutual fund managers, pension 

plan sponsors, and endowment fund managers, 

which require the use of ratings of specified rating 

agencies.88 The effect of these requirements can be 

to increase the demand for and liquidity of securities 

bearing the ratings of specified rating agencies. 

Historically, many of these guidelines refer to the 

ratings from the larger NRSROs by name (i.e., Fitch, 

MIS, and S&P). Despite reports in recent years that 

investors are increasingly changing their guidelines to 

allow for investments in securities rated by a wider 

group of NRSROs,89 investment guidelines continue 

to be identified as a factor impacting the selection of 

NRSROs to rate certain transactions.90 

A related barrier to entry is the inclusion requirements of some fixed income indices. To be included 

in certain of these indices, securities must be rated by 

specified NRSROs. Certain investment companies 

try to closely track the performance of the indices by 

purchasing the securities included in them, and can 

83 See id. For the Report Period, the Asset-Backed Alert database lists nine auto-fleet lease transactions totaling $6.1 billion, 

fifty-five subprime auto loan transactions totaling $26.7 billion, 108 prime auto loan transactions totaling $95.7 billion, 

and thirty-eight auto lease transactions totaling $30.0 billion. 

84 See id. 

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

securities transactions totaling $16.5 billion priced during the Report Period 

86 See id. The Asset-Backed Alert database indicates that fifty-seven subprime mortgage-backed securities transactions totaling 

$20.9 billion priced during the Report Period. 

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

during the Report Period. 

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

s71811-88.pdf. This barrier to entry was also mentioned during the SEC’s Credit Ratings Roundtable held on May 

14, 2013. At the roundtable, a representative of MCR mentioned that, according to a study conducted by MCR, 

approximately 42% of open-end fixed income funds with investment guidelines that reference ratings specifically refer 

to S&P, MIS, or a “major NRSRO.” See Credit Rating Roundtable, May 14, 2013, available at https://www.sec.gov/ 

spotlight/credit-ratings-roundtable.shtml. 

89 See, e.g., Big Investors Accept More Rating Agencies, Asset-Backed Alert, May 19, 2017. 

90 See S&P Vaults Past Moody’s in Conduit Sector, Commercial Mortgage Alert, Jan. 24, 2020; S&P, Moody’s Duke It Out in 

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

ANNUAL REPORT | 23
 

thus increase the demand for securities bearing the 

ratings of particular NRSROs.91 For instance, Fitch 

announced that its ratings had been added to the 

J.P. Morgan High-Yield Bond Indices, noting that 

investors rely on such indices to determine which 

bonds suit their level of credit risk.92 

Market participants and academics have identified 

various other barriers to entry in the credit rating 

industry, including economic and regulatory 

barriers.93 Among the regulatory barriers to entry for 

NRSROs are the costs associated with complying 

with the statutory provisions implemented by the 

Rating Agency Act and the Dodd-Frank Act and the 

related rules adopted by the Commission, including 

the rules and rule amendments that the Commission 

adopted pursuant to the Dodd-Frank Act (the 

“NRSRO Amendments”).94 Commenters on the 

proposed NRSRO Amendments expressed 

concerns that certain of the requirements would 

be burdensome for smaller NRSROs to implement 

and could raise barriers to entry for credit rating 

agencies to seek to register as NRSROs.95 In 

connection with the NRSRO Amendments, the 

Commission acknowledged that, despite efforts 

to limit the impact on small entities, the DoddFrank Act contained requirements, including those 

implemented by the NRSRO Amendments, which 

impose costs on NRSROs and may consequently 

create barriers to entry and have negative impacts on 

competition.96 The NRSRO Amendments as adopted 

by the Commission include various changes intended 

to address concerns regarding barriers to entry, 

including standards allowing NRSROs to tailor 

particular requirements to their business models, 

size, and rating methodologies.97 

91 See, e.g., Rating Firms Seek Changes to Index, Asset-Backed Alert, May 26, 2017. 

92 See Fitch Ratings Joins J.P. Morgan High Yield Bond Indices, Fitch Ratings, June 28, 2017. In a related example, 

DBRS announced that its ratings would be included in the determination of index credit quality classifications for 

CAD-denominated securities in the Bloomberg Barclays Canada Aggregate Index and the Global Aggregate Index, 

resulting in approximately 49 securities being added to the Canadian Aggregate Index. See DBRS Bond Ratings to Be 

Included in the Bloomberg Barclays Canada Aggregate Index, DBRS, Inc., Apr. 19, 2018. 

93 See, e.g., Section IV.C of the March 2012 Annual Report, available at https://www.sec.gov/divisions/marketreg/ 

ratingagency/nrsroannrep0312.pdf; Fitch Assigns ‘A-’ Rating to S&P’s Senior Unsecured Notes Offering, Outlook Stable, 

Fitch Ratings, Aug. 10, 2020; Fitch Assigns ‘BBB+’ Rating to Moody’s Senior Unsecured Notes Offering, Outlook Stable, 

Fitch Ratings, Aug. 4, 2020. 

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

09-15/pdf/2014-20890.pdf. 

95 See 2014 Adopting Release, 79 FR at 55090, 55154, 55161, and 55254-55. See also comment letters received with respect 

to the NRSRO Amendments as proposed, available at https://www.sec.gov/comments/s7-18-11/s71811.shtml. 

96 See 2014 Adopting Release, 79 FR at 55254. 

97 See Section IV.C of the December 2015 Annual Report, available at https://www.sec.gov/ocr/reportspubs/annualreports/2015-annual-report-on-nrsros.pdf. 

24 | OFFICE OF CREDIT RATINGS 
 

V. 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 the credit rating 

agency industry.”98 Section 932 of the Dodd-Frank 

Act is entitled “Enhanced regulation, accountability, 

and transparency of NRSROs.” Both Acts contain 

various provisions designed to increase the transparency—through clear disclosure open to public 

scrutiny—of, among other things, NRSROs’ credit 

rating procedures and methodologies, business 

practices, and credit ratings performance. Under 

Exchange Act rules, NRSROs are required to 

disclose: 

§	standardized performance statistics;99 

§	consolidated information about credit rating 

histories;100 

§	information about material changes and 

significant errors in the procedures and 

methodologies used to determine credit ratings;101 

§	information about specific rating actions;102 and 

§	clear definitions of each symbol, number, or score 

in the rating scale used by the NRSRO.103 

98 See the preamble to the Rating Agency Act. 

99 See Instructions for Exhibit 1 to Form NRSRO. 

100 See Rule 17g-7(b). 

101 See Rule 17g-8(a)(4). 

102 See Rule 17g-7(a). 

103 See Rule 17g-8(b)(2). 

104 See Rule 17g-7(a). 

105 See Rule 17g-7(a)(1)(ii). 

NRSROs must also disclose certain information in 

connection with each rating action.104 Such information includes, among other things, the version of 

the procedure or methodology used to determine 

the credit rating, a description of the types of data 

that were relied upon for purposes of determining 

the credit rating, an assessment of the quality of 

information available and considered in determining 

the credit rating, and information on the sensitivity 

of the credit ratings to assumptions made by the 

NRSRO.105 

In addition to or in connection with required 

disclosures, NRSROs often issue press releases and 

reports at the time of a rating action to describe 

the rationale behind such rating action, and make 

versions of methodologies for determining credit 

ratings available on their websites.106 The availability of underlying methodologies, together with a 

report discussing the analysis supporting the rating 

action, may provide additional transparency into an 

NRSRO’s credit analysis and credit rating process. 

106 The reports accompanying a rating action are frequently available on a paid subscription basis, although some NRSROs 

provide access to such reports for free. 

ANNUAL REPORT | 25
 

From time-to-time, NRSROs also publish revisions 

and updates to their methodologies. They may also 

at times publish revisions to the assumptions that are 

inputs to their methodologies and rating approaches, 

including changes to their economic outlooks or 

default rate assumptions. Revised methodologies 

and related assumptions may provide additional 

transparency into changes in the NRSROs’ credit 

views and analyses. 

NRSROs may also provide transparency to the 

extent they publish commentaries or research. 

NRSROs publish commentaries and research that 

generally include data, analyses, or projections on 

market sectors and economic outlooks.107 These 

publications may be helpful to investors to understand industry trends and the NRSROs’ credit views. 

For example, following the emergence of COVID-19 

in early 2020, NRSROs began publishing commentaries and research that provide their perspectives on 

the potential credit and rating impacts of COVID-19 

on issuers and debt obligations in different market 

sectors. They also began publishing COVID-19-related commentaries on economic and market trends. 

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

26 | OFFICE OF CREDIT RATINGS 
 

VI. Conficts of Interest 

NRSROs operate under one or more business 

models, each having potential conflicts of 

interest. Most of the NRSROs primarily 

operate under the “issuer-pay” model, 

which is subject to a potential conflict in that the 

credit rating agency may be influenced to determine 

more favorable (i.e., higher) ratings than warranted 

to retain the obligors or issuers as clients. Certain 

NRSROs may also operate under the “subscriberpay” model, which means that investors pay a 

subscription fee to access an NRSRO’s ratings. 

This model is also subject to potential conflicts of 

interests. For example, an NRSRO may be aware 

that an influential subscriber holds a securities 

position (long or short) that could be advantaged 

if a credit rating upgrade or downgrade causes the 

market value of the security to increase or decrease 

or that a subscriber invests in newly issued bonds 

and would obtain higher yields if the bonds were to 

have lower ratings. 

Section 15E and the related Commission rules 

address conflicts of interest.108 For example, Rule 

17g-5 identifies certain conflicts of interest that 

are prohibited under all circumstances109 and other 

conflicts of interest that are prohibited unless an 

NRSRO has publicly disclosed the existence of the 

conflict and has implemented policies and procedures reasonably designed to address and manage 

such conflict.110 

Among the conflicts of interest identified in Rule 

17g-5 are conflicts involving individual credit 

analysts or other employees of an NRSRO. For 

example, an NRSRO is prohibited from issuing or 

maintaining a credit rating for a person where an 

employee of the NRSRO that participated in determining, or is responsible for approving, the credit 

rating directly owns securities of, or is an officer or 

director of, the person that would be subject to the 

credit rating.111 

Rule 17g-5(c)(8) is another example of a prohibited 

conflict of interest involving persons within an 

NRSRO. Under the Rule, an NRSRO is prohibited 

from issuing or maintaining a credit rating where 

a person within the NRSRO who participates in 

determining or monitoring the rating, or developing 

or approving procedures or methodologies used for 

determining the rating, also (a) participates in sales 

or marketing activities of the NRSRO or its affiliate, 

or (b) is influenced by sales or marketing considerations.112 

Other statutory provisions and Commission rules 

address potential conflicts of interest that may arise 

when a credit analyst seeks employment outside 

the NRSRO. Section 15E requires each NRSRO 

to have policies and procedures in place to provide 

for an internal “look-back” review process in order 

to determine whether any conflict of interest of a 

former employee influenced a credit rating in certain 

108 See, e.g., Section 15E(h); Rule 17g-5. 

109 See Rule 17g-5(c). 

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

(B) requires an NRSRO’s board of directors to oversee the establishment, maintenance, and enforcement of policies and 

procedures to address, manage, and disclose any conflicts of interest. 

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

112 See Rule 17g-5(c)(8). 

ANNUAL REPORT | 27
 

 

 

instances.113 Rule 17g-8(c) requires an NRSRO’s 

policies and procedures to address instances in which 

a “look-back” review determined that a conflict of 

interest influenced a credit rating. Such policies and 

procedures are required to be reasonably designed 

to ensure that the NRSRO will promptly determine 

whether a credit rating must be revised and promptly 

publish a revised credit rating or an affirmation of 

the credit rating, along with certain disclosures about 

the existence of the conflict.114 

One of the conflict of interest rules concerns the 

issuer-pay conflict of interest relating to structured 

finance products. The Commission adopted Rule 

17g-5(a)(3) in 2009 to address this conflict of 

interest. Since the June 2, 2010 compliance date of 

Rule 17g-5(a)(3), an exemption has been in effect 

with regard to structured finance products issued by 

non-U.S. issuers in transactions outside the United 

States. As described in the final bullet point under 

Section III.B above, the Commission codified the 

exemption in August 2019. In the adopting release, 

the Commission directed the Staff to further evaluate 

the effectiveness of Rule 17g-5(a)(3) with respect to 

ratings of structured finance products that are not 

eligible for relief under the adopted exemption.115 

Towards this end, in a February 2020 speech, former 

Director Kane welcomed input and engagement 

from all interested parties on the effectiveness of 

Rule 17g-5(a)(3).116 

The annual examinations conducted by Staff 

in accordance with Section 15E(p) are required 

to include, among other things, a review of 

the management of conflicts of interest by the 

NRSROs.117 Information regarding the examinations, including any essential findings with respect 

to the required review areas, is included in OCR’s 

annual examination reports.118 

VII. Conclusion 

The Staff will continue to conduct its oversight other activities in furtherance of OCR’s regulatory 

function with respect to NRSROs, including the mission, as described in this Report. 

performance of Staff examinations, and engage in 

113 See Section 15E(h)(4)(A). 

114 See Rule 17g-8(c). 

115 See 2019 Adopting Release, 84 FR 40247, 40250 (Aug. 14, 2019), available at https://www.govinfo.gov/content/pkg/ 

FR-2019-08-14/pdf/2019-17218.pdf. 

116 See OCR Former Director Jessica Kane, Speech, supra note 35. Further details about this speech can be found in the sixth 

bullet point under Section III.B above. 

117 See Section 15E(p)(3)(B)(ii). 

118 The examination reports can be found under “Summary Examination Reports” in the “Reports and Studies” section of the 

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

28 | OFFICE OF CREDIT RATINGS 
ANNUAL REPORT | 29
U.S. SECURITIES AND EXCHANGE COMMISSION 

Washington, DC