Standard & Poor’s hit back at criticism over the credit rating agencies’ role in the euro zone debt crisis on Thursday, with its German operations head saying rating agencies would lose credibility if they “kept silent”.
“We risk our credibility if in certain times we hold back with ratings,” Torsten Hinrichs, S&P’s head of Germany, told the online version of VDI news, a weekly paper of the association of engineers.
“If the rating agencies kept silent, if transparency lacked regarding future solvency, markets would be even more unsettled than when we do comment,” he added.
European politicians have accused credit rating agencies of anti-European bias and called their downgrades a self-fulfilling prophecy, making it harder for countries under assistance programs to return to capital markets.
German Finance Minister Wolfgang Schaeuble said last week he believed limits should be put on the agencies’ “oligopoly”.
They have also presented a major hurdle in efforts to get private creditors to share the burden of a fresh Greek bailout, as they say they would likely treat any “voluntary” rollover of Greek bonds as a distressed debt exchange and declare it, at least temporarily, to be a selective default.
Asked about proposals to roll over bonds into longer maturities, Hinrichs said: “According to our ratings criteria this kind of restructuring would be a clear default. We are obliged to point that out and we have done nothing more.”
“Even if banks chose the lesser of two evils more or less voluntarily, it remains a fact that the situation has been changed to the disadvantage of investors and that the original… promise to pay has not been kept,” Hinrichs said.
Underlying this debate is an increasingly prevalent view in financial markets — disputed by governments — that Greece, and possibly other euro zone periphery states, will have to restructure debt sooner or later and force significant losses on bondholders.
Of the three major agencies, Moody’s and Standard & Poor’s are U.S.-owned and based. Fitch Ratings is headquartered in New York and London and majority-owned by a French company.
The European Union’s executive body is drafting proposals to regulate rating agencies and there has been political talk, but no action so far, about creating a European agency.
(Reporting by Matthias Sobolewski and Annika Breidthardt; Editing by Toby Chopra)