Source: www.breakingviews.com is Europe's leading financial commentary service.
Date: May 2003
Ratings agencies are under the regulatory spotlight. Moody's and Standard & Poor's were criticized for their role in the equity bubble: not spotting the likes of Enron in time. And now they are being criticized for their role in the post-bubble era: tipping companies over the edge by junking them too rapidly. In recent weeks a US congressional sub-committee has held hearings on the agencies, while the SEC published a consultation document on the industry.
The implication of this activity is that the agencies need more regulation. But that's exactly the wrong conclusion - they need less.
This is not to say that the agencies have an unblemished record. Far from it. They have been slow to spot trouble. And they suffer from a big potential conflict of interest: the fact that their income comes from the companies...
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