Posts tagged 'Credit Ratings'

Credit ratings are weird, Crimea edition

Ho ho Standard & Poor’s, very clever, but we saw right through your April Fool’s joke.

First, the parody of lifeless regulatory jargon here is just a little too carried away: Read more

Home is where the heart is, sovereign rating edition

To the many sticks used to bash the credit rating agencies for their role in the (near) downfall of the financial system, we can now add a new one: home bias.

The complaint comes with academic credentials from two economists at the University of Heidelberg, Andreas Fuchs and Kai Gehring, who have looked at the ratings produced by nine agencies in six countries for 143 sovereign issuers.

It turns out that economic and cultural ties produce a more favourable view of the homeland and, guess what, it has become more pronounced since the financial crisis. Read more

ESMA: ‘Get the raters!’

You might expect an EU-sponsored investigation into the sovereign ratings process as practiced by Moody’s, S&P and Fitch to be coloured, politically. But that would be casting aspersions on the upright professionals running the European Securities and Markets Authority.

Emoticon Read more

We go live to Fitch’s Paris office…

Here’s the full text of Fitch Ratings’ one-notch French downgrade, which makes it the last of the big three agencies to remove AAA ratings from France. A key bit of the rationale:

Fitch now forecasts general government gross debt (GGGD) to peak higher at 96% of GDP in 2014 and decline only gradually over the long term, remaining at 92% in 2017. This compares with Fitch’s previous projections in December 2012 of GGGD peaking at 94% (and 92% when it first revised the Outlook to Negative in December 2011), and declining more rapidly to below 90% by 2017… Read more

USAA+, stable

Clearly, the planet — on tenterhooks since S&P cut the world’s biggest AAA-rated credit two years ago — can breathe easily once more.

This is the key bit of why Standard & Poor’s put its rating for the United States of America on a stable outlook again (they also don’t see a repeat of the debt ceiling threatening debt service this year): Read more

Ratings agency puffery

Not our argument — McGraw-Hill’s.

An interesting tack is taken in its lawyers’ motion to dismiss US charges of civil mortgage fraud against Standard & Poor’s, as filed on Monday… Read more

And what took *you* so long, Fitch?

Our headline is the same question you could have asked of Moody’s back in February

The UK lost its second AAA rating on Friday night after Fitch cut its rating to AA+. The outlook’s stable. S&P is now the only one of the big three giving Britain a top rating. The rationale from FitchRead more

La brutta figura

Italy has finally fallen out of the ‘A’ ratings and into the Bs, at Fitch Ratings.

Here’s the explanation for cutting it to BBB+, outlook negative: Read more

What took you so long, Moody’s?

Worth reading the full Moody’s rationale for (finally) cutting its credit rating for the UK from Aaa to Aa1: Read more

S&P killer, qu’est-ce que c’est?

Did the world not already know that a CDO analyst at S&P parodied Talking Heads “Burning Down the House” as the residential market teetered in 2007?

Like “it could be structured by cows and we would rate it”, it feels like a meme that would need to be invented if it didn’t already exist. Read more

The US v S&P

Hat-tip to the WSJ Law Blog, the full US government complaint against Standard & Poor’s:

 Read more

Debt ceilings and downgrades: who cares?

After the two sides fired shots across each others’ bows — the Republicans through Politico and Obama via satellite — Fitch released a threatening note this morning:

Fitch Ratings’ expectation is that Congress will raise the debt ceiling and that the risk of a U.S. sovereign default remains extremely low. Nonetheless, and in line with our previous guidance, failure to raise the debt ceiling in a timely manner will prompt a formal review of the U.S. sovereign ratings. … Read more

You’re in selective default (again), S&P tells Greece [updated]

No explanation had been given by S&P at pixel time. [Update: it's pasted below the jump.] But the situation is pretty clear: Greece’s “voluntary” buyback of the PSI bonds is being carried out in distressed conditions (ie it will otherwise lose eurozone financial support). Read more

AAA ratings, alternative universes, and hindsight

Yes, it’s very bad for S&P. Australia’s federal court found that the ratings agency had misled local councils through assigning AAA credit ratings to CPDOs which it had failed to check properly.

But since this could well be a landmark case for credit ratings as causes of financial harm… Read more

S&P downgrades Spain

So Standard & Poor’s has cut Spain by two notches, to BBB- from BBB+, just one notch above junk level. As the FT said:

The rating agency’s move came after markets had closed in New York, but the euro still fell slightly on the news to trade 0.1 per cent lower at $1.2870.

S&P’s report is in here. Read more

Black clouds, and Fitch

Fitch judges the risk of a fiscal financing crisis to be negligible…

But the rating agency still cranked up the negativity on the UK’s AAA rating on Friday. They affirmed it, but have been on negative outlook since March. Read more

Fattening tails in euroland structured finance

A request for comment by Moody’s — on how to rate asset-backed securities experiencing “rapid country credit deterioration”:

(Click to enlarge) Read more

Moody’s cuts Italy two notches

Moody’s left Italian sovereign debt two notches above junk on Friday, after downgrading it from A3 to Baa2.

The rating agency cited “signs of an eroding non-domestic investor base” for Italy’s bonds. Read more

Breaching the AAA bubble, charts du jour

Look at the AAA sovereigns rise… then fall, after 2010:

 Read more

The Moody’s bank downgrades

New York, June 21, 2012 — Moody’s Investors Service today repositioned the ratings of 15 banks and securities firms with global capital markets operations. The long-term senior debt ratings of 4 of these firms were downgraded by 1 notch, the ratings of 10 firms were downgraded by 2 notches and 1 firm was downgraded by 3 notches. In addition, for four firms, the short-term ratings of their operating companies were downgraded to Prime-2. All four of those firms also now have holding company short-term ratings at Prime-2. The holding company short-term ratings of another two firms were downgraded to Prime-2 as well.

Morgan Stanley was downgraded by two notches rather than the three which were possible. Nine other banks also lost two notches. Moody’s did downgrade Credit Suisse three notches though. The full list… Read more

The (sovereign) mystery box

Cookie Monster: It a horse! It a cow! It a ball! It a pogo stick! It a rump roast! It a moose!

(Reuters) – The European Central Bank is discussing a medium-term plan to scrap rating rules on euro zone sovereign bonds and instead set their value when used as collateral in lending operations on its own internal assessment, central bank sources said… Read more

No rating outlooks please, we’re MEPs

OK. Before reading on… a reminder of how the sausage gets made in EU legislation. Something voted on by Members of European Parliament, or MEPs, still must go to the Council for approval and, quite often, amendment.

With that caveat, some sausage on sovereign credit rating regulation: Read more

Does Moody’s not read the FT letters page?

From Mr Michael Maslinski, on Thursday

Sir, Richard Lesmoir-Gordon (Letters, June 8) is undoubtedly right in his conclusion that the excessive reliance on mathematics and financial models has driven out the traditional banking skills of “common sense, assessment of character, knowledge of history, how countries and cultures differ and experience of life”… Read more

The fourth rater

It is more than 12 hours since DBRS, the Canada-based agency, placed its ratings for Italy, Spain, Ireland and Portugal under review with negative implications. So far the world hasn’t ended.

(*looks furtively outside*) Read more

JPMorgan, a Fitch ratings harpooning [update: now S&P]

Fitch Ratings-New York-11 May 2012: Fitch Ratings has downgraded JPMorgan Chase & Co.’s (JPM) Long-term Issuer Default Rating (IDR) to ‘A+’ from ‘AA-’ and its Short-term IDR to ‘F1′ from ‘F1+’. Fitch has placed all parent and subsidiary long-term ratings on Rating Watch Negative.

Fitch has also downgraded JPM’s viability rating (VR) to ‘a+’ from ‘aa-’ and placed it on Rating Watch Negative. In addition, Fitch affirmed JPM’s ’1′ support rating and ‘A’ support rating floor. A full list of rating actions follows at the end of this release. Read more

Monte Carlo-simulated sovereign credit

And it’s all free and open source.

Presenting the Public Sector Credit Framework — a quantitative alternative to sovereign and muni credit ratings produced by the agencies. It’s just launched: Read more

Downgrading a eurozone sovereign: you know the drill

We liked the reaction of Societe Generale’s Sebastien Galy to S&P’s two-notch Spain rating cut:

1. A belated recognition of reality, this typically leads to some competition amongst rating agencies to capture headlines. Read more

BBBasta — Spain cut to BBB+

S&P late on Thursday night became the first agency to cut Spain’s sovereign credit rating from the As to the Bs. It’s a two-notch downgrade from A to BBB+. Outlook negative.

They blamed (drumroll) worse-than-expected economic contraction: Read more

SEC charges Egan-Jones

Washington, D.C., April 24, 2012 — The Securities and Exchange Commission today announced charges against Egan-Jones Ratings Company (EJR) and its owner and president Sean Egan for material misrepresentations and omissions in the company’s July 2008 application to register as a Nationally Recognized Statistical Rating Organization (NRSRO) for issuers of asset-backed securities (ABS) and government securities. EJR and Egan also are charged with material misrepresentations in other submissions furnished to the SEC and violations of record-keeping and conflict-of-interest provisions governing NRSROs.

Full SEC Order here. The regulator has alleged that Egan-Jones made a material misrepresentation in claiming to have rated government debt and ABS — and that it hadn’t — when making its NRSRO application, and that conflicts of interest were present: Read more

Glencore ’08 revisited

Credit rating feedback on Glencore’s recent deal-making spell is finally in. And there’s something of a small split between the two main agencies.

Moody’s, for example, changed the direction of its review of the ratings on Glencore International to direction “uncertain”, having previously had the ratings on review for upgrade. The issue they see is with debt and liquidity: Read more