David Prosser: Standard & Poor's is still feeling the heat
Outlook There is confusion over exactly what the Securities and Exchange Commission is investigating in relation to the downgrading of the US by credit ratings agency Standard & Poor's (and no one will say on the record). Some reportssuggest the SEC is conducting an insider dealing inquiry. Others think the regulator is looking into the decision itself.
It's possible that both types of inquiry are occurring, but either way, the SEC needs to be careful not to be drawn into a political witch-hunt.
On insider dealing, it is the case that in the hours before S&P's announcement of its decision a week ago last Friday, rumours swept global markets that a downgrade was imminent. S&P officials were not the only people with advance knowledge – their views were communicated to US officials – but it is not unreasonable of the SEC to look into whether anyone leaked the news with the intention of making money.
As for an inquiry into S&P's methodology, that looks harder to justify. True, there was a row about the figures the ratings agency used to inform its decision (S&P subsequently accepted the US Treasury's data but said this did not change its view that a downgrade was necessary). But while the SEC does have some powers to monitor the activities of credit ratings agencies, it will be vulnerable to charges of political bias if it emerges it has chosen to exercise those powers against just S&P within days of it making an unpopular announcement.
Since the ratings agencies, including S&P, made such fools of themselves during the creditcrisis, they have rightly been subjected to more regulatory scrutiny than in the past. On both sides of the Atlantic, regulators are now expected to satisfy themselves that these organisations, which wield such huge power with the decisions they make, are using that power responsibly.
But regulators must be responsible too. S&P should be left to get on with doing its job without fear of political intimidation. There are enough variables already to cope with in the decision-making process over sovereign debtratings – the threat of a damaging regulatory or policy response should the decision be one that the authorities do not like should not be added to those calculations.
- 1 The political parties aren't all the same – which means 2015 will be a 'big-choice' election
- 2 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 3 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
UK weather: Warning for more snow and ice as freezing temperatures and gales hit Britain
New York police shooting: thousands turn out for the funeral of Rafael Ramos
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...