MOODY’S INVESTORS SERVICE made a dramatic and rapid revision to its joint default analysis (JDA) in March following widespread complaints that it had created a ridiculous disparity between senior unsecured bank ratings and the underlying intrinsic financial risk of the same banks. Few could make sense of the dramatic changes, which raised several banks’ senior debt ratings close to or at the sovereign level – as well as creating numerous other anomalies.
The strength of the market’s ridicule of Moody’s was quite extraordinary. Bankers asked if the JDA acronym stood for joke default analysis, research pieces with titles such as Moody’s makes an Aaas of itself were published. Normally diligent bank analysts spent time devising disparaging commentary on Moody’s for internet-based Bollywood movies.
Moody’s proclaimed that its new methodology was highly transparent and straightforward, but it opened up a...
