3. Credit Ratings
d. distinguish between corporate issuer credit ratings and issue credit ratings and describe the rating agency practice of "notching";
e. explain risks in relying on ratings from credit rating agencies;
What is "notching"?
A credit rating agency's notching policy primarily intends to reflect the relative recovery prospects of different instruments issued by the same issuer. A rating agency may notch up secure debt from the company credit rating and notch down subordinated debt.