Moody's, the No 2 credit rating agency, facing accusations over its role in the credit crisis, warned that profits will fall short of expectations because of plummeting demand for new bond ratings.
"Disruptions and uncertainty in the financial markets worsened materially in September," dampening issuance in that month and also through October, Moody's chief executive Raymond McDaniel said. In the third quarter, the company’s profits slipped 17 per cent, and it cannot now meet its forecasts for the year.
It now expects full-year revenue to drop by a percentage in the low 20s. In July it projected a mid- to high-teens percentage decline.
The Moody's warning came a day after bigger rival S&P said it saw a 14 percent drop in revenue as the dollar volume of US bond issuance tumbled 62 percent in the third quarter.
The credit rating agencies are being blamed for helping inflate the credit bubble by giving gold-plated ratings to mortgage-related bonds that have subsequently turned out to be financial junk. They are paid for their ratings by the firms that issue the bonds – something that some politicians have described as a conflict of interest.
The Securities and Exchange Commission said yesterday it will propose new rules governing the rating agencies within the next two weeks. Reforms could include requirements to disclose more about how they determine their ratings.Reuse content