European
Banks Preparing To Boycott Big Three Rating Agencies
13
June, 2012
We
were wondering how long Europe's insolvent, and very much scorned,
banks would take the constant downgrade abuse (or reacquaintance with
reality as we like to call it, but that is irrelevant) by the rating
agencies without retorting. After all the same organizations that
allowed bank "credit analysts" to pretend they did work for
years, when they all merely fell in place in some lemming-like
procession, patting each other on the back, pocketing record bonus
after record bonus and praising groupthink encapsulated by the made
up letters AAA, are now largely non-grata first in Europe, and soon,
following the imminent downgrade of American banks, in the US as
well. It appears that the response is finally coming. Sky News
reports that "some of Europe's largest banks are intensifying
discussions about a move
to reduce their co-operation with the big three credit ratings
agencies amid widespread dissatisfaction with their decision-making."
After all, when all they do is downgrade, as opposed to the old
standby, upgrade, who needs them. In fact, why not just shut their
mouths entirely. Sadly, this is precisely what is on the horizon.
I have learned that finance directors and other executives from about a dozen of the Continent's biggest lenders held talks on the issue during the Institute of International Finance in Copenhagen last week.
I'm told that the discussions did not result in a formal decision to reduce the amount of information disclosed to Fitch, Moody's and Standard & Poor's, but one source familiar with the talks said today that "things are certainly moving in that direction".
The judgements of the dominant trio of ratings agencies have been questioned repeatedly as the Eurozone crisis has deepened, triggering downgrades of numerous European governments and major banks.
Moody's is expected to announce downgrades to the ratings of British banks including Barclays, Lloyds Banking Group and Royal Bank of Scotland in the next few days.
One senior bank executive put it like this to me: "The ratings agencies got it horribly wrong on the way up; there are lots of reasons to suppose they are getting it wrong on the way down."
They
sure do: somehow they still rates banks in Europe higher than a D,
when even blind chimps with typewriters would have no problem finding
the correct key on the keyboard to describe the true solvency state
of the continent's banking system.
In
the meantime, the boycott of anyone who dares to write adversely of
banks is coming. Because you see thair "assumptions" are
wrong.
In
an ideal world only banks, and specifically the same analysts who
previously had relied solely on the rating agencies to do their work
for them, should rate other banks. And the range of recommendations
should range from Buy to Very Strong Buy only.
Anything
below that should be forbidden by the respective constitution, of the
US, and of the soon to be Federal German States of Europe next.
All
of the above notwithstanding, the only real rating agency out there
with some integrity was, is and will continue to be Egan-Jones. All
else are merely fluffers for the largest paying client.
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