US Agencies Hit out at Moody's and S&P
Byline: Piers Townsend
Independent rating agencies are calling for US Securities and Exchange Commission (SEC) to abandon rules that they claim protect Moody's and Standard & Poor's (S&P), the world's best known rating agencies.At the first of two hearings in Washington, DC last Friday, Egan-Jones was the most vociferous in its calls for reform of the SEC's system, which is based on nationally recognised statistical rating organisations (NRSROs).
There are only three: Moody's, Standard & Poor's and Fitch. Sean Egan, whose ratings company downgraded collapsed telecoms company WorldCom more than two years ago while its bigger competitors maintained better ratings, said: "If the SEC cannot provide more protection to investors, we recommend that the NRSRO system be dropped."
Greg Root at Dominion Bond Rating Services, a rival agency, said: "We would like to see some clarity as to what the process is for becoming an NRSRO - it has been a bit ad hoc. We need some movement from the SEC and a timeframe."
Many investors require ratings from Moody's and S&P before they invest in debt securities. Egan claimed that this has resulted in a "partner monopoly", in which a gain in revenues at one does not reduce the revenues of the other.
Small agencies face an uphill battle in levelling the playing field. Egan has been hammering away at what he calls "insurmountable barriers to new competitors" for several years. …