Québec Droite

Quel ministre des finances osera aujourd'hui répéter publiquement qu'il faut contrôler ces notateurs, alors qu'il s'expose à ce que ces agences déclarent le lendemain que la note de ce pays doit être abaissée, ce qui alourdirait immédiatement le cout de ses emprunts? Par exemple, qui peut penser que le ministre grec des Finances est aujourd'hui libre d'exprimer son point de vue sur la gouvernance financière mondiale. Bien plus encore, qu'en sera-t-il demain de celui de l'Espagne, prochaine cible des marchés et, comme par hasard, président de l'Union européenne pour les six prochains mois?

But why is it so difficult to reform the rating process?

Extrait de: Rating Agency Reform: The Real Problem That Has Not Been Recognized, Malay Bansal, Seeking Alpha, June 28, 2010

This embedding of ratings in the financial system and reliance by so many participants on the ratings gives the nationally recognized statistical rating organizations or NRSROs tremendous power as ratings changes can have significant impact on companies, and even nations.

There are several other examples where a company needing to raise more debt in capital markets finds it cannot do so, or not at a reasonable cost, once it has been downgraded even while it was attempting to raise capital to improve its financial situation. The downgrade increases cost of financing as investors demand more yield reflecting lower rating. The downgrade may also result in existing investors having to sell holdings, further increasing the yields in the market. It can become a vicious circle increasing the likelihood of default. The downgrade reflects rating agency’s opinion of the outcome, but it also becomes a causal factor in determining that outcome. The rating agencies in effect become the judge, jury, and the hangman for the company.

The Power of the Rating Agencies

One reason that makes it very difficult to make changes to the ratings process is that ratings are heavily embedded in almost every part of the financial systems around the world. They are used in investor’s charters defining what they can buy. They are used for calculation of capital charges for banks, insurance, and other financial companies. They are used in loan covenants and triggers on corporate debt. They are used to calculate haircuts on repo lines, along with many other uses.

Also, despite the recent failings, they serve a very useful purpose. Not everyone has the expertise and resources to analyze every security in detail. Presence of credit rating agencies gives smaller investors a starting point for analysis that they may not otherwise have.

The Real Problem That Has Not Been Recognized

In the current system, the rating agencies’ opinion can become a causal factor in making that opinion become reality. Time and again, in structured products and otherwise, it has been clear that the rating agencies are not infallible in their judgment, and do not have any special powers of predicting future. Their failures in predicting subprime mortgage performance have been appalling. But even if you look at the forecasts of defaults in corporate bonds, the predictions do not match the actual outcome, and the predictions themselves change over time, as they should.

So, if ratings are heavily embedded in the system and are needed, and yet rating agencies are not smarter than everybody else, and if they do not have special predictive powers about the future, how do we avoid giving their subjective opinions so much importance and extraordinary power?

Extrait de: Dilemmas of reforming the rating agencies, Aline van Duyn in New York , Financial Time, June 11 2010 03:00

On both sides of the Atlantic, the debate about how to reform credit rating agencies has taken on renewed zeal and fervour.

Such is the magnitude of the changes being considered that, since the beginning of April, billions of dollars have been knocked off the stock market values of Moody's Investors Service and Standard & Poor's, the two biggest rating agencies.

The ratings business, dominated by Moody's, S&P and Fitch, largely relies on fees from the entities and companies selling bonds, with investors getting the information free. Following, the financial crisis, the conflicts of this relationship are being questioned.

During the pre-crisis boom in securities backed by risky US mortgages - from simple mortgage-backed debt to highly complex collateralised debt obligations (CDOs) - triple A ratings were often assigned to huge numbers of such deals, fuelling their demand and generating substantial revenues for the biggest rating agencies.

According to the Financial Crisis Inquiry Commission, which is investigating the causes of the financial crisis, Moody's alone rated $4,700bn of residential mortgage-backed securities between 2000 and 2007, and $736bn of CDOs.

Phil Angelides, chairman of the FCIC, said at hearings in New York last week that Moody's was a "triple A factory" whose expansion drove a sixfold jump in its stock price from 2000 to 2007. "Investors who relied on Moody's ratings did not fare so well," he said.

Many of the securities plunged in value and were downgraded sharply as house prices in the US collapsed - and the losses to the financial system continue to hurt economies around the globe.

The biggest rating agencies have repeatedly said that they have learnt their lessons and have adapted many of their internal controls and procedures.

Nevertheless, efforts to regulate the rating agencies more heavily have picked up steam. In the US, the drive comes after a series of high-profile hearings such as those chaired by Carl Levin and Mr Angelides, which have highlighted the mortgage security failings and potential conflicts in the ratings model.

The Securities and Exchange Commission this month introduced new rules requiring huge amounts of disclosure about the information used to rate securitised deals in the hopes of encouraging others to analyse it too - called rule 17g-5.

In addition, new laws that could have two significant effects are being considered. One could increase the liability rating agencies face - opening them up to lawsuits from issuers and investors. The second could change the way ratings are allocated, with the proposal suggesting the SEC should assign raters to deals.

"What is still unclear in the longer term is who pays for rating agencies, or how ratings get assigned," says Anna Pinedo, partner at Morrison Foerster.

In Europe, the impact of ratings during the Greek debt crisis - and controversial decisions such as downgrades of Greece and Spain - has also highlighted just how influential they are.

Last week, the European Commission moved to increase competition by requiring that the information on which many ratings are based is made accessible to all rating firms - similar to the SEC's 17g-5 rule.

Brussels also proposed putting agencies operating in Europe under the supervision of a new pan-European Union regulatory authority. "The lack of competition [between rating agencies] is of particular concern," said José Manuel Barroso, the EC president.

Regulatory changes may encourage new entrants to the business. There are a handful vying to break in or expand their market share. Some, such as DBRS, the Toronto-based ratings agency, have been on the sidelines for years - though it has more recently picked up greater market share.

"There is much more interest [among investors] in looking for other opinions," said Daniel Curry, president of DBRS's US operations. "It gives us a chance to go in and in effect sell ourselves."

Others are complete newcomers that have not yet acquired the rating agency status needed in the US, such as K2 Global Partners set up by Jules Kroll. Others, such as consultancy Pricewaterhouse Coopers, are eyeing the sector.

"There are efforts on the part of legislators to reduce the power of the rating agency oligopoly," says Mr Kroll. "These efforts could give alternative approaches more of a chance."

The core of the model, where issuers of debt pay for ratings, remains controversial. But it looks unlikely to change.

The main alternative is that investors pay. However, many, including Warren Buffett, the billionaire investor whose Berkshire Hathaway is the biggest shareholder in Moody's, do not want to. There are some rating agencies that charge investors, such as Egan Jones, but their market share has remained low. Charging investors is "a road to a small business", says Mr Kroll.

This means managing the conflicts will remain key. Mr Buffett said last week that rating agencies inevitably competed for market share - either on price or by lowering their ratings standards. He suggested a monopoly might be the best answer. "If you have one rating agency, it would not need to compete," he said.

With legislation heading in the other direction, managing the urge to grab more market share will be vital, not least to restore investor confidence in ratings.

"For any rating agency there's a moral hazard," says Mr Curry. "A short-term drop in your standards and revenues go up, but ultimately this can destroy your business model. Now, everyone is being very conservative and careful. The challenge is how people behave seven or eight years down the road."

Cahier spéciale : Agences de notation

Table des matières :

Les agences de notation : La terreur des pays souverains qui sont surendettés

Introduction

Situation

Historique

Conflit

A. Conflit d’intérêt avec les entreprises

B. Conflit d’intérêt avec les banques

     Crise immobilière

C. Conflit avec les États souverains

Notation des États Souverains

Les critères des agences de notations pour les pays souverains

Les conséquences d’une décote d’un pays souverain

Dagong Global Credit Rating, une agence chinoise

Mauvaise régulation

Les agences de notation complices de la spéculation

Le Québec selon las paramètres des agences de notation

A. La dette du Québec selon le PIB        

B. Le déficit budgétaire / dépenses budgétaires du Québec

C. La dette brute / sur les revenus

Conclusion

Les conséquences d’une décote sur le Québec

Historique de la notation du Portugal

La situation au Portugal

Les conséquences des taux d’emprunt face à une décote

Simulations une décote de 2 crans pour le Québec

Leurs imputabilités

Balles III

Mais elles ne règles pas les problèmes fondamentaux

Autres solutions

Mais qui a assez de courage pour modifier les agences

Titrisation et crise financière : complice, pas coupable

La crise financière de 2007-2008: réflexions

Source de référence

Format PDF : Les agences de notation : La terreur des pays souverains qui sont surendettés