The credit rating agencies have come in for fierce criticism for their role in the current credit crunch for not adapting their ratings to show the augmenting risk surrounding US non-conforming mortgages.
Moody’s’ move aimed to prevent future finger-pointing over this by showing the risk of areas both in normal and constricted market conditions.
Speaking to the Financial Times, Brian Clarkson, president and chief operating officer of Moody’s, said: “One of the issues we are currently talking to regulators about is the possibility of creating tools to address liquidity and market value issues. The sudden lack of liquidity due to the lack of transparency is currently the biggest problem in the market – can we develop a product that speaks to this risk? It is something we are working on.”
The other two big rating agencies, Fitch Ratings and Standard and Poor’s, were also believed to be looking at a similar system.
Bob Sturges, director of communications at Money Partners, believed the move was justified and needed.
“Clearly the rating agencies have shown their fallibility in light of unprecedented global events. Some of the criticism has been justified as they were supposed to be the first line of defence and sense when something is wrong and they weren’t. Therefore, improvements must be undertaken and should be welcomed.”
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