Standard & Poor's has launched Understanding Ratings, a new information and education resource for investors found on the Web site
The Web site brings together for free articles, videos, podcasts, and educational guides to provide insights into what credit ratings are (and what they are not), the processes by which S&P produces ratings, and how those ratings have performed over time.
It focuses on three core elements of credit ratings: criteria used to determine ratings and analytics; ratings performance; and people, which includes the 1,300 S&P analysts around the world rating debt securities.
To explain these areas, S&P's rating analysts, among others, address the following topics:
the ratings process and the processes S&P has implemented to support ratings independence;
the specific methodologies to analyze the different asset classes inclduing corporate bonds, municipal bonds, structured finance, and sovereign debt; the ways ratings performance can be measured and compared; an evaluation of the performance of ratings in the different asset classes duringr the past several years; the role of the analyst and rating committee in arriving at ratings; and S&P's credit outlook for various industries, sectors, countries, and regions.
Additionally,
"In the wake of the financial crisis, there has been much discussion about the performance of credit ratings," said Deven Sharma, S&P president .
Sharma added that earlier in 2010, the rating agency conducted a comprehensive review of credit ratings, which showed that ratings, for nearly all asset classes, performed broadly as expected when faced with extreme stresses of the past two years, except for some ratings on certain U.S. RMBS. Via the Guide to Ratings Performance as well as the other materials on the new Web site, Sharma said that S&P addresses the questions that buyers have asked regarding recent ratings performance, deliver facts and data on how ratings have performed and also provide details on the changes that S&P has made based on lessons from the recent financial meltdown.
"Discussions with investors around the world over the past two years have consistently highlighted their desire for more transparency about how ratings are determined," said Bruce Schachne, vice president of market development at S&P. "Credit ratings continue to serve as benchmarks for creditworthiness, and investors continue to utilize credit ratings and research as part of their investment decision making processes."
Ratings performance has been a particular area of heightened investor focus over the past two years.
Investors, Schachne said, are seeking a better understanding of how the rating agency is arriving at its ratings, including what the methodologies are, the role the analysts play in the rating process, and how ratings perform.
He added that the new Web site was designed to meet the information and ratings transparency needs of buysiders, specifically pension funds and plan sponsors. Furthermore, S&P's ratings and research, he said, are aimed at assiting investors to better identify and understand credit risks.
Moody's Efforts For Covered Bonds
In the same spirit of rating agencies providing more information about their respective methodologies on the different asset classes, yesterday Moody's Investors Service said it has updated its quarterly monitoring overview for covered bonds in EMEA. The report is called Moody's EMEA Covered Bond Monitoring Overview: Q1 2010.
It summarizes the most important credit measures in the rating agency's transaction-specific Performance Overviews, which offer detailed statistical information on a deal-by-deal basis and are published quarterly.
This third quarterly issue has Web links to all published 1Q10 performance overviews. Beginning in the next quarterly issue, Moody's will be expanding the number of credit measures that are tracked over time. Specifically, it will focus on the evolution of country and deal-specific credit measures, probably in the form of the Collateral Score and Cover Pool Losses.
Additionally, the rating agency publishes a weekly summary of structured finance credit, ratings and methodologies.
