S&P; issues list of rating reforms
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Standard & Poor’s unveiled an overhaul of its grading process in response to criticism that its ratings on mortgage bonds helped precipitate the sub-prime meltdown.
S&P;, a unit of McGraw-Hill Cos., Thursday announced 27 steps it said would boost confidence in its ratings. Rivals Moody’s Investors Service and Fitch Ratings took similar steps this week.
Reaction to the moves was mixed.
“What they’re doing is a step in the right direction, but I think the regulators will have their say,” said Luis Maglanoc, head of research at UniCredit.
New York Atty. Gen. Andrew Cuomo, who is investigating S&P; and Moody’s, depicted their moves as “too little, too late” and “more like public-relations window dressing than systemic reform.”
S&P; said it would:
* Name an ombudsman to look at potential conflicts of interest among analysts.
* Rotate analysts to ensure they don’t get too close to the companies they rate.
* Review the work of analysts who leave S&P; to join issuers they rated.
* Add emphasis to factors such as liquidity and volatility.
* Consider “what if” scenarios to prepare for market disruptions.
* Flag ratings on securities such as mortgage-backed bonds, to help distinguish them from corporate and government ratings.
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