Amearican Credit Rating System And Its Enlightenment

Credit rating is the predication of debtor's capicity and inclination of repaying the principal capital and interest by the credit rating institutions according to the given measurements. Credit rating is the simple and objective implication of financial risks and can reduce the informative asymmetricness of the financial ventures and investors so as to better and invigorate the bond market and improve the capital market effeciency. Consequently, in developed countries, credit rating has become an indispensable part of the captical market. With the advancement and evolution of the captical market in China, especially the springing up of bond market, credit rating is becoming increasingly important, and the prospect of credit rating is bright. However, as the credit rating is on the threshold in China, its development is relatively tardy. As the most advanced credit country, with its progression of more than 100 years, the United States has formed the leading credit rating system in the world. It is beneficial for the advancement of Chinese credit rating system to study the American system and draw lessons from it. Meanwhile, due to the direct impact of credit rating on negotiable securities and the importance of credit rating as the reference of investors' decision on investment, the validity and objectivity of credit rating are usually in high profile. The Enron Event in 2001 exposed the three big credit rating cooperations——Moodys, Standard & Poor's and Fitch——to the public's criticism and condemnation. Recently, along with the explosion and spread of the subprime mortgage crisis, the three cooperations were once more driven to the trial of public opinion, whose non-objective grading of secondary mortgage loan added fuel to the flame of the subprime mortgage crisis. Consequently, their authority was questioned again, and people were provoked to revisit credit rating and credit rating institutions. People come to re-study the importance of credit rating and realize that along with its valuable experience, lessons ought to be learned from America to step up the development of our national credit rating institutions.This thesis consists of four chapters. The first chapter introduces the basic theories of credit rating which helps peole with a general understanding of the definition, functions, principles, categories and methods of credit rating. The second chapter is the introduction of the American credit rating system which covers its progression course, institutions, symbols and index and its regulation system. The third chapter is people's re-pondering over credit rating due to the subprime mortgage crisis which led to the global financial crisis pounding the world economy. And the grading by credit rating institutions was inevitably responsible for the outbreak of that crisis. This chapter, based on the elaboration of the outbreak and spread mechanics of the subprime mortgage crisis, analyzes the role of credit ratng in the subprime mortgage crisis, reveals the root of the credit rating institutions'error and expounds the inspirations of the subprime mortagage crisis for the movement of credit rating industry. Based on those inspirations, the conclusion is made that the development of the Chinese credit rating industry is a necessity to ensure the secure and steady progression of Chinese financial sovereignty. The fourth chapter covers the advancement of Chinese credit rating system, which introduces its progression route and achivements, points out its problems and puts forward some propositions and countermeasures to invegorate and mature Chinese credit rating system.