Investors love ratings. It gives them a sense of direction and confidence. However, what happens when the rating agency you trust did not rate accordingly? Perhaps they under-rated and you missed the opportunity? Perhaps they inflated and everyone bought and later it caused huge losses for all those who believed them? I personally like to read all the ratings and analysis from all the industry experts. I seldom trust them totally because everyone would have their own analysis but the judgement should be from me after going through the actual stats. Agree?
In US, Standard & Poor’s Financial Services (S&P) will be paying US1.375 billion for a settlement of a Justice Department-led lawsuit. The lawsuit said that the ratings firm had inflated ratings in the years before the financial crisis. This settlement is related to ratings issued by S&P between 2004 and 2007. Note the following carefully. This settlement does not contain any findings of violations of law by the company according to McGraw Hill Financial which is the parent company to S&P. S&P said this settlement is to “avoid the delay, uncertainty, inconvenience, and expense of further litigation.” In brief, this settlement’s main purpose is to get the case out of the way and not prolonged. Do not be too alarmed, in developed nations, these do happen and it’s just another usual court case.
Now, what do you think about ratings agencies? Well, I still think I love them and would want them to continue their ratings business. Agree or not is a personal matter. Just remember that decisions should be based on what you believe from what you read. It should not be the fault of these rating agencies and it is highly unlikely that you can sue them for a decision gone wrong for you. Happy rating everything in the world today.
written on 7 Feb 2015
Next suggested article: Malaysia and Mongolia, same rating. 🙂