Our credit ratings have shown strong performance over time as effective measures of relative creditworthiness: Our studies have shown that the higher the ratings, the lower the default rates, and vice-versa. For example, our historical statistics show a 3-year cumulative default rate for a ‘BBB’ rated company of 0.91%, vs 4.17% for a ‘BB’ rated one, 12.41% for a ‘B’ rated one and 45.67% for a ‘CCC/CC’ rated one.

Credit ratings are designed to be dynamic, and evolve to reflect changes to market conditions or issuer-specific credit factors. They are not designed to be static. We change ratings if and when our view of credit risk changes. We do this based on our analysis of relevant information, and in line with our published methodologies. Because ratings evolve over time to reflect economic and market developments or issuer-specific credit drivers, they are seen to provide valuable opinions about current credit risk.

Driven by lessons learned from the financial crisis and new regulations introduced around the world, we invested heavily to further the quality, transparency, and integrity of our ratings. We emerged as a stronger organization and encourage you to read on for additional detail on both actions S&P Global Ratings has taken and the significant regulatory changes made globally.

S&P Global Ratings uses the issuer-pays business model. Under this model, rating agencies charge issuers for providing a rating. The model promotes transparency by allowing ratings to be released publicly free of charge– meaning they’re scrutinized every day by all corners of the market, the media, and academia. It also provides rating agencies with access to high-quality information from issuers that might not otherwise be available and enhances the quality of analysis.

We have safeguards to identify and manage potential conflicts of interests, from which no business model is immune. For example, we clearly separate our commercial and analytical functions, and restrict communications between sales personnel and ratings analysts. We comply with regulations around the globe, which impose strict rules on how we manage and disclose any conflicts.

Credit ratings are one of several inputs investors (e.g., portfolio managers and analysts at mutual funds, pension funds, insurance companies, and university endowments, etc.) may use in their decision-making process. Other factors could include, for example, analyzing the issuer’s financial statements and SEC filings, meeting with company management, reviewing sell side analyst reports, conducting proprietary research, and building financial models. Credit ratings add to the mix of inputs available to investors' objective, independent, forward-looking assessments on an ongoing basis of the relative likelihood of whether an issuer may repay its debts on time and in full. Credit ratings do not speak to investment merits.