Fimalac Head Admits Conflict of Interest at Rating Agencies
Byline: Guy Paisner in Paris
The head of Fimalac, the French holding company that owns Fitch Ratings, has spoken out against the controversial practice of credit rating agencies offering risk assessment consultancy services to their clients.Marc Ladreit de Lacharriere, president of Fimalac, says the provision of consultancy services represents a clear conflict of interest to rating agencies.
"When a rating agency offers risk assessment consulting services to the same client, it's a bit like auditors doubling up as consultants. We want to remain pure and will not continue to offer these services," he says.
The US Securities and Exchange Commission (SEC) is compiling a report on the increasingly influential role of credit rating agencies in the securities markets. This follows two hearings last November as part of the Sarbanes-Oxley Act that may result in a tighter regulatory regime.
The SEC is addressing issues ranging from potential conflicts of interest at rating agencies that are paid by the companies whose debt they rate, to creating a more level playing field for smaller agencies, and to more regulation of the sector and better information flow.
Stephen Joynt, president and chief executive of Fitch, says that the company's ratings advisory business, which is called Fitch Ratings Assessment Services, was only established last May and that these activities do not represent a material proportion of Fitch's overall revenues. …