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Main rating agencies under control for their poor handling of the subprime crisis

de Radu Rizea
Marţi, 27 mai 2008, 16:39 English | Top News

The U.S. Securities and Exchange Commission (SEC) launched controls on the way the three main rating agencies - Moody's, Standar&Poor's and Fitch - conducted their workings during the real estate credits crisis. Under control, as well, are some issues referring to possible errors in Moody's IT system, Reuters informs.

The news agency quotes Erik Sirri, SEC manager, at the US Securities&Exchange Commission (SEC), says that his institution demanded the agencies to explain the policies and procedures the used to detect errors in establishing the ratings for structured financial products. SEC also asked to be informed on any errors found during the past four years.

"Rating agencies have come in for criticism for not giving early warning of a number of big corporate debt scandals, and also for their ratings of complex products that were hit hard by widespread defaults on U.S. subprime mortgages and the ensuing credit market crisis", Reuters comments.

According to the agency, SEC Chairman Christopher Cox had earlier told Reuters that his regulatory body had started an inquiry into Moody's, whose shares have plummeted over the last week on concerns that it may have made ratings errors.

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