LOS ANGELES-Credit ratings are used by investors, issuers, investment banks, governments and broker-dealers. For investors, these rating agencies increase the range of investment alternatives and provide measurements of relative credit risk. But over the years, especially after the 2007-2009 financial crisis, and more recently, ratings downgrades during the European sovereign debt crisis of 2010 and 2011, they have drawn some criticism regarding their role in the financial system.
Rich Walter, president of Faris Lee Investments, tells GlobeSt.com that “the rating agencies provide the only way today for investors to rely on the underwriting of a third party to make credit decisions.” Walter says the system is by no means perfect, noting that “credit ratings require a multitude of analysis and don’t necessarily look at future trends in determining these.”
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