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And Then There Were Four

The SEC approved a new credit rating agency. Should you care? Maybe

By Staff Writer | Updated on April 01, 2003

In an apparent response to criticism that the three credit rating agencies were slow to downgrade bad actors like Enron Corp. and WorldCom Inc., the Securities and Exchange Commission admitted a fourth company to the exclusive group it regards as qualified to provide corporate bond ratings. The point? To inject a little competition to get debt analysts on their toes about spotting trouble. A noble mission, but how much of a threat does the new entrant, Canada’s Dominion Bond Rating Service Ltd., really pose? In the short run, not very much; any potential will take some time to develop.

Established in 1976, Dominion plays a prominent role in Canada’s debt market, just as market leaders Moody’s Investors Service and Standard & Poor’s Corp. do in the U.S. However, Dominion is much smaller than the major U.S. rating agencies. As a private company, it does not report its revenues, but Dominion has 65 employees. By contrast, Fitch Ratings, the third, smallerU.S. player, says it has more than 1,200, while Moody’s has more than 1,700 and S&P more than 5,000.

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