When founded in 1913 by John Knowles Fitch, Fitch Ratings was actually a publishing company that sold data to Wall Street. But by 1924, Fitch had introduced the now popular "AAA to D" rating system. Today, Fitch Ratings is the third largest rating agency in the world, behind Moody's and Standard & Poor's. Yet, it's not size that it is chasing, says the agency's President & CEO, Stephen Joynt, who was in India recently for the first time on his way from Beijing, Shanghai and Hong Kong to the US. In an exclusive interview to BT's Priyanka Sangani, Joynt explained Fitch's philosophy and plans. Excerpts:

What's the agenda for this trip to India?

I'm here mostly to consult with our senior management, more so as our business here in India has been growing over the last several years, and we want to think about how we can expand our business further. I will be meeting with people from different regulatory authorities in the country, as the ratings we provide are used in regulations. Apart from that, I will be meeting some commercial players... like somebody from the State Bank of India among others. And also senior business people. This trip is to help me understand more about this market and why Fitch should be expanding.

Do you think the change in policies as a result of the change in government would have an impact on India's credit rating over a period of time? Do you see it as having an impact on foreign investment in the country?

I am not very informed on the political front, but I have spoken to our senior sovereign team of analysts. Although I cannot comment on the political side of things, on debt rating, we have increased our rating earlier this year and that was on the basis of the growth potential in the country. Then, there is the fiscal situation, which is constraining the ratings. So the rating has more to do with economic factors rather than political factors. (The new government's) first financial statement (read: budget) is expected soon, so we will wait for that before commenting.

Your rivals Moody's and Standard & Poor's have tied up with ICRA and CRISIL respectively, while Fitch India still remains a fully-owned subsidiary. Do you see this as an advantage for Fitch in India?

I think it's a great advantage. We are able to operate fully independently here through our management team in a fully local way. This way we avoid any possible problems associated with having minority control, arguments about local versus national or international perspective-we have had experiences like that in the past among others. This way we are fully involved and fully in control, and can do a better job of delegating much of the responsibility to the local management to build the business here. I think we can function more successfully this way.

"Whatever the market requires, we do have the capability of offering it"

So there is no tie-up on the cards?

No, not at all. We are very happy at the way we are progressing. Other than that, as our interests and analysts and opportunities in India grow, we need to make sure that, as the parent company, we are there to fund these opportunities in terms of capital as well as in people.

In India, you don't cover all the sectors that you do globally. Are there any plans to expand coverage?

We have a presence in public finance, asset management etc, so we are there across the entire rating spectrum in terms of silos and products. In structured finance, we have a presence in auto-backed securities, commercial mortgage and residential mortgage-backed securities, CDOs (collateralised debt obligations) etc, which is the full range of products that Fitch offers in other jurisdictions. It depends on what the market wants here. Whatever the market requires, we do have the capability of offering it. In insurance, for example, there are a lot of private companies coming in, and it is a product that is definitely on our radar screen. If we find the right opportunity we are ready to launch it from our side.

Do you think the rising interest rates and the rising home prices can put an end to the housing boom?

Yes. We do think that the increase in interest rates will dampen the refinancing activity going on. In the US, mortgages are either fixed rate or floating rate unlike other places that are off floating. So because of that there is a lot of activity when the interest rates come down. So that activity creates a more active refinance market. I do think that this will now slow down as the interest rates increase. The movement among people changing housing in the US will slow down and because of that, there is likely to be a dampening of appreciation in prices of houses. The offset to that is the improvement in the economy and soft feelings about inflation, which might lead to an increase in prices because of the inflationary standpoint as contrasted with the interest rate standpoint. It's been very easy for people to make investments in housing over the past five years with low interest rates.

How serious do you think the problem of the rising household debt in advanced economies is?

We think in the US this is a very serious problem. The consumer is very indebted-more indebted than ever before. In a weakening economic situation that would be a cause for concern, but in a softer landing economic situation, maybe less of a concern.

What's your reading of the US economy at present?

This is the election year, so it is difficult to read what will happen, rather what will not happen. Economy won't be as dramatically impacted, though.

Fitch merged with IBCA and subsequently took over Duff & Phelps and Thomson Bankwatch in 2000 to emerge as the third major player in the ratings market. What brought about the merger and how do you think it has helped you?

Our idea in building Fitch was to be known as one of three top global rating agencies. Originally, before the merger, we were rating agencies in size number three, four, five and six. So often the rating industry was known as the Big 2 and the other small rating agencies. So our goal, which we managed to achieve through this merger, was to have one larger, more important agency. Now we are more often referred to as three medium global rating agencies. That I think becomes very important. It's consolidation in some ways-which some would say is negative, but others say that there is now more choice. Earlier there were only the top two agencies, now there are three. Our new goal now, is to be the most recognised and the best-not the biggest. Moody's and Standard & Poor's are more than twice our size. We want to be the best.

And how do you plan to go about doing that?

The same way we've gone about so far. If you think about it, we've gone from being a very small agency to this big, so we must be doing something right. So we would continue to do what we have been doing so far-hire experienced analysts, produce the best quality research. The ratings are very similar from all the agencies, so it's not just the ratings that would differentiate us, but the quality of our research and analysts, and the service that we provide to our investors.

"Our new goal now, is to be the most recognized and the best-not the biggest"

How does Fitch rate vis-à-vis Moody's and Standard & Poor's? Does Fitch offer any services that the others don't?

What Fitch has been most noted for originally is our work in structured finance. So what we would do is original research, statistics and probabilities, and also the creation of new models that would allow investors to be more scientific about their analysis. And also the creation of new models that are allowing us to be more scientific about our analysis. A recent example in the US is the CDOs (Collateralised Debt Obligation), where we created a new model called 'Vector', which is more scientific and does better work on co-relational risk than other models done by Moody's and S&P's previously. That is a good example of how we can step forward and distinguish ourselves as we have past 15 years in structured finance.

Has there been any major change in strategy since you took over as CEO in 1997?

No, I think we have been very consistent in our strategy. There have been several areas of focus for us. One was to focus on the ratings business and to also look at other financial business services that we could become involved in. The other goal was to become one of the three leading rating agencies. We achieved that through the merger, and now we want to be the best of the rating agencies. So that continues to be our strategy and we continue to be successfully growing. At this point, though, we are more open to other businesses that are tangential to ratings. For example, in the last year or so we have been more involved in risk management consultancy and developing models and doing research on operational risk management.

There has been a spate of corporate scandals and bankruptcies in the West. Where does the responsibility of the credit rating agency come in?

There are certain situations that are separate from our control and involvement, and some that are not. When a company's credit is deteriorating or changing because of the economy and competition, that is what our analysts should be identifying. In some situations like Enron, it was the responsibility of the auditors and there was not much we could do about it. We see our job as analysis using financial statements and information that is accurate. There is a lot we have learnt though, like looking at governance, accounting practices, shareholding, complexity of statements etc, which contribute to providing accurate credit ratings. We have worked on finding out how we can improve our analysis of governance.

You just got back from China. How do you view the economy there?

The growth there has been amazing. The professionals there were very concerned about how to have a soft landing. Our analysts feel they can accomplish this. They need to temper some of the high level of growth rate there without losing their growth and momentum.

Any plans for expansion?

There are no expansion plans in terms of looking at new countries at present. About 60 per cent of our revenues are from the US, a little less than 30 per cent from Europe. Around 5 per cent come from Latin America and Asia. We feel these places should be contributing a lot more towards the total revenue, so we are looking at increasing our share in this region.

How much does India contribute to this total revenue?

Currently, India's contribution to our global revenue is probably less than 1 per cent.