Nationally Recognized Statistical Ratings Organization (NRSRO) is an organization offering credit ratings to the American government. The ratings set by NRSRO is by the government for understanding the financial markets better and for having certain regulations in place for businesses and people. These ratings act as a guideline for insurance companies, money market funds, regulators, financial institutions etc.
The main concept was that the financial institutions need not keep in reserve the same quantity of capital to safeguard the institution (against supposedly a run on the bank) if the financial institution was deeply invested in highly liquid and secure securities, such as U.S. government treasuries or commercial paper from secure and stable companies. The concept of NRSRO originated in 1975.
As of 2011, there are nine Nationally Recognised Statistical Ratings Organization. Major examples of NRSROs are Standard and Poor Inc., Moody’s Investors Service, Fitch Inc., A.M. best Company Inc. etc.
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