The Financial Times recently published an article highlighting the potential “conflicts of interest” and “bias” facing some of the world’s most respected research firms — the credit ratings agencies. A quote from the article gets to the heart of the apparent conflict.
“A long-standing criticism of the agencies is that because they are paid by the companies or countries that they rate, their opinion cannot be independent. The agencies reply that their reputation depends on strict neutrality. A recent Federal Reserve Board staff report confirmed that a concern for reputation drove the agencies’ actions. It is also true that financial services is no different to other industries, where the companies that inspect products are paid by their manufacturers. How do the agencies arrive at a rating?”
The article can be found on http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1079420177003
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