Daily Management Review

Italy Scores Up the Recent Crisis to the Rating Agencies


According to The Financial Times, Italy is pressing charges against the rating agencies S&P and Fitch on the fact that they have caused undue damage in the country in 2011 and 2012. Italian rating in those years, according to prosecutors, was established unfairly by the agencies, and this led to the fact that Italy has particularly keenly felt the massive crisis of the Eurozone at the time.

The Italian prosecutor's office filed a lawsuit against the rating agencies Standard & Poor`s and Fitch, as well as against a number of their employees, accusing them of that, incorrectly assessing the situation in the country in 2011 and 2012, they composed an undervalued rating. Thus, according to the prosecutor's office, they have caused undue damage to the country against the backdrop of the debt crisis, unfolding in the Eurozone. According to the newspaper Financial Times, although this is not the first lawsuit of this kind, when the major rating agencies are accused of setting unfair rankings, it also has a distinctive feature. The prosecutor's office is pressing charges against not only the agencies themselves, but also against a number of employees involved in the process of ranking.

The Italian Chamber warned the rating agencies on the fact, that such an action may be brought, in early 2014. According to the auditors, they could sue S&P over € 230 billion because, assessing Italy's rating, the rating agencies did not take into account the country's history, art and natural wealth. And all this, according to the Accounting Chamber, "is the basis of economic power" of the state, and is "recognized by all states of the world."

However, the respondents do not consider himself guilty of admit exacerbating the crisis in Italy. "This case is based on a misunderstanding of our role, which is to support the transparency and liquidity of the markets by providing an independent opinion on the relative creditworthiness on the basis of our open and transparent methodology," – says S&P statement over the claims of Italy. "As we have always said, this case is without merit, and we will actively defend themselves - Fitch told the FT.- We believe that Fitch and our staff will be justified in the course of litigation."

Prosecutors in Italy remains optimistic, despite the fact that most of the numerous lawsuits against rating agencies did not end up: they either were withdrawn by the plaintiffs or the court rejected. However, there are other examples. For example, in 2012 the court in Australia ruled that S&P misled investors by setting the highest rating for derivatives that shortly thereafter fell sharply. And earlier this year, S&P paid $ 1.4 billion to settle claims in the US Department of Justice on that the agency has set a high rating for financial products linked to mortgages, despite the growing risks in the US housing market.

source: ft.com

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