Posts tagged 'Standard & Poor’s'

Raters’ sovereign bias, a new rebuke

Another salvo arrives in the intellectual spat over whether or not credit rating agency opinions have been subject to country bias, possibly influencing Europe’s debt crisis.

After we featured a strongly worded piece by the Unicredit economist team in March, IPE magazine asked them to turn it into an article.

IPE asked for responses from the three big agencies. Fitch again declined, S&P replied along the lines of the one given to us, while Moody’s decided to comment specifically on the Unicredit paper.

We’ll sample the arguments below, but in preview Erik Nielsen is not impressed and has dared the rating agencies to meet in front of regulators and or academic specialists to compare notes. Watch this space. Read more

Sovereign rating bias, a clanging gauntlet lands [Update]

We’ve featured one study that claimed to find bias in sovereign ratings, written in the measured tones of academia, which was enough to set off some tit-for-tatting between S&P and the authors.

Well the members of UniCredit’s economics team have decided to enter the debate, and they have no intention of holding back on “the damaging bias in sovereign ratings”. The low down to follow, but lets skip to the conclusion:

In light of our findings, we suggest that credit rating agencies should be stripped of their regulatory powers and these transferred to an international body. Failing that, the ratings agencies should be forced to substantially increase transparency, including publishing a separate breakdown of the objective and subjective components of ratings, the minutes of the rating committees, and the voting records.

 Read more

Subprime securities – still being downgraded

If you woke up on June 10, 2013 and thought the subprime securities crisis was behind us, well, you were wrong.

Some two weeks ago Moody’s announced it was downgrading 28 tranches of various bonds (as well as upgrading two tranches, and confirming others) in an action that covered roughly $1.2bn worth of mortgage-backed securities (MBS). 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

Solipsist & Poor’s

Thanks to Reuters Jamie McGeever for spotting this rather circular bit of introspective logic from S&P. You see, the ratings agency has discovered that its own sovereign ratings are a good guide to its future sovereign ratings. So, for example, since 1989, they have never lowered a sovereign rating with a positive outlook.

It’s the kind of record you fight to keep. Read more