By Jonathan Stempel and Richard Barley
S&P, a unit of McGraw-Hill Cos
Critics say the agencies at first assigned high ratings to hundreds of billions of dollars of securities linked to low-quality debt, only to exacerbate market turmoil by later rapidly downgrading many of those same securities.
S&P said it will appoint an ombudsman to look at potential conflicts of interest among analysts, and hire an outside firm to review compliance and governance processes.
S&P will add emphasis to factors not covered by traditional ratings, such as liquidity and volatility, and consider "what if" scenarios to prepare for market disruptions.
"What they're doing is a step in the right direction, but I think the regulators will have their say," said Luis Maglanoc, head of credit research at UniCredit. "Whether it really addresses all these calls for transparency, we'll have to see."
Regulators and politicians are looking closely at the ratings agencies' business model, where ratings are paid for by issuers rather than investors, and also the efforts they have made to ensure the accuracy and reliability of ratings.
S&P's changes are the latest of several overhauls by rating agencies to address criticisms about ratings.
Meanwhile, Moody's Corp's
"Over a period of time there is still comparability between structured ratings and corporate ratings, but I think it is important for us that we are more transparent around our structured ratings," she said.
Raymond McDaniel, Moody's chief executive, on a conference call said his company is still responding to inquiries from the U.S. Securities and Exchange Commission and state attorneys general concerning its ratings. He said the SEC unsurprisingly has "particular interest" in structured finance.
