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December 07, 2011 at 06:22 AM
The hounds are on the scent. The European Union agency that presides over the ratings actions of the likes of Moody’s, Standard & Poor’s, and Fitch Ratings has begun an investigation into how they arrive at rankings for sovereign bonds and other debt, and it warns that if wrongdoing is uncovered, the penalties could be severe–all the way up to and including withdrawal of their licenses.
Reuters reported Wednesday that officials from the European Securities and Markets Authority began visits at the beginning of November to not just the big three ratings agencies, but some of their smaller competitors. They will continue to conduct their investigation through the end of December.
The investigation has taken on added significance after S&P’s warning on Monday that it might downgrade nearly the entire eurozone—15 countries were warned that their ratings were in danger, as previously reported by AdvisorOne.com. The timing of the warning drew criticism from European leaders, as well as accusations that it was politically motivated.
