“The undeserved power of rating agencies”
Gabriele Guglielmi, Filcams CGIL Nazionale, OpenCorporation Coordinator
In a great article titled “The undeserved power of rating agencies” published on March 19, 2012 in the magazine Internazionale, JAYATI GHOSH, an economist who teaches at the Jawaharlal Nehru University of New Delhi, taking his cue from the fact that “the rating agency Moody’s has put Ethiopia under observation for a possible downgrade” wrote a sharp and stark analysis on the “extraordinary and undeserved power exercised by a few private rating agencies”.
The top 3 rating agencies: Moody’s, Standard & Poor’s and Fitch Ratings are included in the OpenCorporation Observatory, but not in the Ranking. This is because there is little public information about them and they do not allow for an evaluation. Odd, isn’t it?
Following is some more information that, according to the Dantesque “law of retaliation”, is available thanks to BVD’s Orbis database, which happens to belong to one of the three.
According to JAYATI GHOSH:
“the Security and Exchange Commission (Sec, the U.S. stock exchange regulator) has recognized them as official statistical rating organizations. And many institutional investors have to bow to their decisions.”
“Moody’s, Standard & Poor’s and Fitch Ratings control more than 94 percent of credit reference ratings.”
Also STANDARD & POOR’S RATINGS GROUP is a “Private” company, and “private” seems unfortunately also the information that would interest us, while MOODYS EVALUATIONS INC is controlled by MOODY’S CORPORATION, of the three, it is the only one that is public/listed and the information of over a hundred shareholders, whether investment funds or companies, is “public”. This is the list: “Current shareholders” of MOODY’S CORPORATION.
JAYATI GHOSH writes of the “three rating agencies,” that they “have significant cross-shareholdings.”
Thanks to Moody’s CORPORATION, a public/listed company, we have the list of “Current shareholders” of this company. Assuming that the Rating Agency controlled by HEARST CORP and S&P itself adopt a “pantograph” similar to that of MOODYS EVALUATIONS INC, we will find that for example “UBS GROUP AG via its funds” owns 0.85% of Moody’s CORPORATION.
Grazie a Moody’s CORPORATION, azienda pubblica/quotata, abbiamo l’elenco dei “Current shareholders “ della medesima. Presumendo che anche l’ Agenzia di Rating controllata da HEARST CORP e la stessa S&P adottino un “pantografo” simile a quello di MOODYS EVALUATIONS INC constateremo che ad es. “UBS GROUP AG via its funds” possiede lo 0,85% di Moody’s CORPORATION. Moody’s assigns “Ratings” to UBS Group AG The same applies to Fitch Ratings
Obviously “UBS” publishes all its “Credit ratings”: Fitch, Moody’s and also that of Standard & Poor’s.
JAYATI GHOSH further highlights the matter by mentining a “recent report” by
“Yuefen Li, the United Nations expert on foreign debt and human rights states that rating agencies are not accountable to anyone for their mistakes.”
“Moreover, Li points out, conflicts of interest abound. Rating agencies are private companies, mostly funded by the institutions they are supposed to judge. And because they are part of the markets they rate, their private interest inevitably shapes their decision-making processes.”
On the subject that “conflicts of interest abound,” here’s another interesting observation point: “interlocking directorates”
Top20 table of who occupies more “seats” (OpenCorporation elaboration on data Orbis-BVD). For the top ten at least one role per day, including Sundays (during the pandemic probably only “remotely”)
For further information this is a snapshot taken in March 2021: Interlocking_Top 3 Rating Agencies”