A credit rating agency measures credit worthiness of institutions from companies to governments and assesses their ability to pay back a loan. The top three credit rating agencies are Standard and Poor’s (S&P), Fitch Ratings and Moody’s. Each rating agency has developed its own rating system. Fitch Ratings developed its system in 1924, which was later adopted by S&P. Both use a system of letter sliding from the best rating ‘AAA’ to the lowest ‘D’ for borrowers already defaulting on payments. In detail, ‘AAA’ represents the best quality borrowers that are reliable and stable without any foreseeable risk to future payments, while ‘D’ means the institution has defaulted on payment obligations, having failed to pay back the loans – S&P and Fitch Ratings assert it will keep on doing so. Moody’s follows a different rating system. It argues that their ratings have a superior approach that considers not only the likelihood of default, but also the severity of the default. In addition, S&P and Fitch Ratings are only interested in how likely a borrower is to default, whereas Moody’s cares how long the default is likely to last. Most importantly, S&P does not care what the recovery value will be – the amount of money that the lender will end up with after the borrower has defaulted. Moody’s, by contrast, tries to figure out the expected losses, which makes it more preferable.