Nationally Recognized Statistical Ratings Organization (NRSRO) Definition

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Updated September 08, 2023
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What Is a Nationally Recognized Statistical Ratings Organization (NRSRO)?

A nationally recognized statistical ratings organization (NRSRO) is a credit rating agency that provides an assessment of the creditworthiness of a firm or financial instrument(s) that is registered and approved by the Securities and Exchange Commission (SEC).

Not all credit rating organizations are NRSROs. As of 2023, there are 10 NRSROs registered with the SEC. The SEC Office of Credit Ratings administers its rules relating to NRSROs.

Key Takeaways

  • Nationally Recognized Statistical Ratings Organizations (NRSROs) are SEC-recognized credit rating agencies.
  • Credit rating agencies are organizations that provide an assessment of the creditworthiness of a company or a financial instrument.
  • Ratings agencies also evaluate the creditworthiness of government debt.
  • There are currently 10 NRSROs approved by the SEC, although other credit agencies do operate without being NRSROs.

Understanding Nationally Recognized Statistical Ratings Organizations (NRSROs)

Credit rating agencies (CRAs) provide objective analyses and independent assessments of companies and countries that issue such securities. Here is a basic history of how the ratings and the agencies developed in the U.S. and grew to aid investors all over the globe.

Generally, to be considered a nationally recognized statistical ratings organization (NRSRO), the SEC must deem the agency to be "nationally recognized" in the U.S., and it must provide reliable and credible credit ratings. Also taken into consideration by the SEC are things like the size of the credit rating agency, operational capability, and the agency's financial resources.

The credit ratings provided by NRSROs are used by the U.S. government in several regulatory areas and are also used as benchmarks by federal and state agencies. Investors also refer to ratings by NRSROs. Some examples of current nationally recognized statistical rating organizations include Moody's Investors Service Inc., S&P Global Ratings, Fitch Ratings Inc., and A.M. Best Rating Services, Inc.

In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which enhanced the Commission’s oversight of the regulation of NRSROs.

NRSROs also evaluate the creditworthiness of national governments. For example, in August 2023 Fitch Ratings joined Standard and Poor's in downgrading the U.S. government from the top AAA tier to the slightly lower AA+ level. The agency attributed the downgrade to "repeated debt limit standoffs" that threatened to impact the country's debt repayments.

Current NRSROs

Since large credit agencies often operate on an international scale, regulation occurs at several different levels. Congress passed the Credit Rating Agency Reform Act of 2006, allowing the SEC to regulate the internal processes, record-keeping, and certain business practices of CRAs. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, commonly referred to as Dodd-Frank, further grew the regulatory powers of the SEC including the requirement of disclosure of credit rating methodologies.

Below is a list of credit rating agencies currently registered as NRSROs, organized in alphabetical order. SEC documents related to each NRSRO are accessible by clicking on the name of the NRSRO.

  • A.M. Best Rating Services, Inc.
  • DBRS, Inc.
  • Demotech, Inc.
  • Egan-Jones Ratings Co.
  • Fitch Ratings, Inc.
  • HR Ratings de México, S.A. de C.V.
  • Japan Credit Rating Agency, Ltd.
  • Kroll Bond Rating Agency, Inc.
  • Moody's Investors Service, Inc.
  • S&P Global

What Are the Big Three Ratings Agencies?

The "big three" ratings agencies are Standard and Poor's, Moody's Investors Service, and Fitch Ratings. These three firms produce the most widely-used credit ratings, although each uses its own methodology.

What Does a Credit Rating Measure?

Much like personal credit scores, a credit rating measures the risk that a borrower will be unable to repay its debt obligations as scheduled. This is computed based on a variety of factors, such as existing debt levels, revenue streams, expenses, and past payment history.

What Does a High Credit Rating Mean?

Credit ratings measure the risk associated with lending money to a company, government, or other institution. A high credit rating means that the borrower has a high chance of meeting its repayment schedule, with low risk to the lenders. A low credit rating means that creditors are taking a higher risk by lending to these borrowers, and should expect a higher interest rate to compensate for that higher risk.

The Bottom Line

Nationally Recognized Statistics Ratings Organization, or NRSRO, is the official term for ratings agencies that measure the creditworthiness of corporate or government borrowers. These agencies are regulated by the Securities and Exchange Commission to ensure accurate, unbiased credit ratings in the bond markets.

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  1. U.S. Securities and Exchange Commission. "Current NRSROs."

  2. U.S. Securities and Exchange Commission. "About the Office of Credit Ratings."

  3. U.S. Securities and Exchange Commission. "Oversight of Nationally Recognized Statistical Rating Organizations: A Small Entity Compliance Guide."

  4. Fitch Ratings. "Fitch Downgrades the United States' Long-Term Ratings to 'AA+' from 'AAA'; Outlook Stable."

  5. U.S. Securities and Exchange Commission. "Learn More About NRSROs."

  6. Fidelity. "Bond Ratings."

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