Rating agencies have wind in their sails

With interest rates being kept at a low level, corporates tend to increase their indebtedness. Companies in need for funding are today turning more and more toward capital markets, making less recourse to bank loans.

Such operations require an evaluation of the debt quality, hence the ever-growing recourse to rating agencies, three of which largely dominating the market: Moody’s, Standard & Poor’s and Fitch, accounting for 95% of the rating requests made worldwide.

A report published by supervisory authorities of American stock markets, found that serious irregularities were spotted whereas even since 2008, regulations were made more stringent and oversight reinforced.   Ratings are sometimes arbitrary and are modified on the requests of the line manager. Some of those ratings are granted although they are different from those resulting from the quantitative patterns in force.

Rating agencies are also accused of improving rates regularly with a view to getting hold of customers and market shares. The last blame  rating agencies are up against is the fact of being paid by the very same companies to which they grant ratings.