An Update on Scope Ratings

In February of last year we looked at Scope Ratings, a new entrant to the credit rating marketplace, on the back of an article by this author in European Company Law. Since that date, there have been a number of positive developments for Scope so in today’s short post we will be updated on those developments.

Scope Ratings is a German-based rating outfit that has ambitions to challenge the hegemony of the Big Three – S&P, Moody’s, and Fitch Ratings. So far, since its inception in 2011, it is certainly not backing away from the challenge. Currently, the firm is Europe’s largest Credit Rating Agency (European-based, at least), and employs more than 200 staff across seven offices (Berlin, Frankfurt, London, Madrid, Milan, Oslo, and Paris). Recent successes, especially within the Structured Finance department, recently saw Guillaume Jolivet appointed to the agency’s Board, which founder Florian Schoeller suggested is an ideal fit as he is ‘ideally positioned to help the group become a leading provider of credit intelligence and Europe’s champion credit rating agency’. Additionally, Scope has recently appointed Ralf Garrn as Head of its Digital Development, with Garrn coming from Euler Hermes rating which he founded in 2001 (which is now co-owned by Moody’s). So, internally the agency is performing well and is on course to reach its aim of attempting to challenge the Big Three. Externally, they have received news recently that is a massive boon.

Two major German insurance companies have joined the growing list of investors who are supporting the firm. HDI, and Signal Iduna, are two of the major players within the German pension-fund marketplace and their joining of Scope now takes its investor base to nearly 70, which is impressive given this particular marketplace. To accentuate this recent growth spurt, the agency has been awarded its licence to perform rating services within Switzerland, which it sees as an area of growth following recent investments there. This is all incredibly positive. However, and only time will tell if this is true or not, the ‘tipping point’ has not been reached yet. That point refers to the moment when the agency truly comes into the Big Three’s (and in reality, it is the Big Two) sphere of influence and the leading oligopolistic agencies have the decision to make of whether to attempt a takeover, to directly challenge, or to allow the oligopoly to grow to four members. Oligopolies, of course, have no set number but there is usually a natural equilibrium and for the credit rating oligopoly it appears that three is the magic number. Therefore, Scope’s growth, whilst fantastic news for the sector and for investors, is charting a path that almost all other non-Big Three agencies take, and the results are always the same – be taken over, stop growing, or cease to exist. Hopefully Scope can buck this trend, but the theory of oligopolistic organisation, and also history, tells us that this may be a difficult task.


Keywords – Business, credit rating agencies, Scope Ratings, @finregmatters

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