Speaking at the Council of Mortgage Lenders conference in London last week, Ward attacked agencies for bowing down to competitive pressures when assessing RMBS.
He told delegates: “Why should agencies be downgrading and putting assets on ratings watch? You would not expect an AAA-rated security to be put on rate watch. The initial rating job has not been done properly.”
Ward says the problem lies in the fact that there are three agencies – Moody’s, Standard & Poor’s and Fitch – competing with each other. “We have been duped by competitive pressures,” he said.
An S&P spokesman says: “A credit rating is, very simply, an opinion about the relative probability of a security or debt issuer defaulting in the future. Our ratings are based on the facts available to us at the time that these opinions are made.
“They are designed to be relatively stable. Unlike market prices, they do not fluctuate on the basis of sentiment. But our rating opinions can and do change as our views of the fundamental creditworthiness of a borrower or debt security change over time.”
At a Treasury select committee last month, FSA chairman Lord Adair Turner criticised rating agencies for lack of accur-acy. He told the committee: “What credit agencies try to do is produce accurate predictors of the likelihood of a single company or bank defaulting. What happened over the last five years is that the agencies went way beyond that and began to rate complicated assets which were subject to more rapid change than a single company or bank.”
At the same committee meeting, Chancellor Alistair Darling confirmed that with European and US backing, international governments would press for agency regulation.