Standard and Poor’s has warned that ratings do not provide “a perfect crystal ball”.
S&P managing director and head of financial services ratings Dominic Crawley said ratings are “opinions” which should feed into investment decisions, not dictate them. He said: “There is no guarantee we would not miss something in the future, we do not have a perfect crystal ball.
“Ratings are opinions, they are one piece of valuable information which is available to investors but there are many other bits of relevant information around credit decision-making available elsewhere.”
The European Commission’s credit ratings agencies 3 directive requires institutional investors to carry out their own due diligence and reduce how often they refer to external ratings.
Crawley said S&P has set up a team of 40 analysts to spot “large shifts in the curve” and has changed the criteria issuances must meet for certain ratings but he added: “It is virtually impossible to predict which rating will go bad when.”
He said 5.2 per cent of non-structured products given a BBB rating in 1990 had defaulted by 2010. For A-rated products that figure was 2 per cent, for AA-rated products it was 0.5 per cent and for AAA is was “less than that”.
He said: “We have been absolutely clear. We do not expect investors to rely solely on what we provide to come to a decision.”