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ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?
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ResearchTalks Vol. 3 - Dependency on rating agencies : Can we trust them?

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by Sylvie Focquet

by Sylvie Focquet

Published in: Economy & Finance, Business
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  • 1. Dependency on rating agencies: can we trust them?Sylvie FocquetMarch 2012
  • 2. Rating agencies have a huge influence on the market …
  • 3. …but why are they so powerful?... …but why are they so powerful?...Moody’s headquarter
  • 4. …and can we trust them?2008 Rating agencies hearing
  • 5. Companies Low Interest % Investors and states Could you lend me money? Our opinion: “It is good quality debt” Is it risky? Rating agenciesWhat do the rating agencies?
  • 6. Companies High Interest % Investors and states Could you lend me money? Our opinion: “It is junk debt” Is it risky? Rating agenciesMore risk more return.
  • 7. Rating agencies give an opinion about the debt risk AAA C
  • 8. Who are they? >90% of revenuesmostly paid by the corporate issuers
  • 9. Why are they so powerful? Insufficient informationLegislation Investor Strategy
  • 10. Cascade effectCascade effect
  • 11. Rating agencies Cascade effect Investors Attention danger Debt Debt
  • 12. Can we trust them? : Performance?Some big failures……however they can add value
  • 13. Can we trust them? Conflicts of interestIssuerpaid Shareholders
  • 14. Can we trust them: civil liability?How to distinguish betweenBad luck, negligence or bad intent? Who will take the risk to give a different opinion?
  • 15. Can we better trust them with investors paid agencies?Who is willing to pay?Some investors…but they can also influence ratings Free rider problem
  • 16. Can we better trust them with more competition?I will give more Company can rate-shop nice ratings I will need less info
  • 17. How to reduce our dependence? Legislation changeOwn risk assessment
  • 18. What are the alternatives?Market based indicators Accounting ratios Alternatives are Complement not perfect ratings
  • 19. Conclusion Improving ratings will be difficult and trickyHaving perfect ratings is idealistic We gave too much importance to rating agencies
  • 20. Ratings should be only one piece

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