Thursday, September 30, 2010

Pot. Kettle. Black.

Interesting opinion regarding release of information and calls of transparancy...

The International Monetary Fund criticized Wednesday the abuse of sovereign debt ratings, warning that credit rating agencies may wield undue influence with investors.

"Sovereigns should do more to provide relevant and timely information to CRAs (credit rating agencies) and other market participants to enable them to conduct their own independent credit analysis," the IMF said in a synopsis of a report entitled "The Uses and Abuses of Sovereign Credit Ratings."

The report, a chapter in the biannual Global Financial Stability Report due to be released in full next week, examines the roles of the top three CRAs: Fitch, Moody's and Standard & Poor's.

A key focus of the study was to determine whether they rate sovereign debt accurately.

The problem was a key factor in the Greek debt crisis earlier in the year, as agency downgrades helped to accelerate the country's descent to the brink of default.

Once a credit rating is lowered to a certain level -- "Ba1" and less for Moody's, "BB+" and less at rival S&P, for instance -- certain investors are required to sell a bond deemed "speculative," which automatically lowers its value.

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