LONDON, November 13, 2007 – Standard & Poor's Ratings Services today
addressed the UK's House of Commons Treasury Select Committee as part of its
ongoing inquiry into financial stability and transparency. Senior representatives
from Standard & Poor's appeared alongside other major rating agencies before
the panel to address questions on the role, record and regulation of credit rating
agencies as well as providing information in relation to Northern Rock. Standard & Poor's
also provided a written submission to the Committee which is available at www.standardandpoors.com.
In its submission, Standard & Poor's reiterated that an S&P credit
rating is an opinion about the risk of a security defaulting. "Our ratings
do not address the likely market performance of an investment or whether its
price can be said to reflect its credit risk and/or its expected returns. They
are not designed to address other market factors, such as supply and demand,
that may affect the pricing of securities."
Standard & Poor's highlighted that the track record of its structured
finance ratings as assessments of default risk remains excellent. "Since
1978, the average five-year default rate for investment grade structured securities
is less than 1% and for speculative grade securities it is over 15%. By comparison,
the issuer-weighted five-year default rate for investment grade corporate issues
is 1.3% and 20.5% for speculative grade issuers."
Commenting on recent events in the subprime mortgage market, Standard & Poor's
explained the series of steps it is taking to improve its analytics and processes,
to enable it to anticipate events and process information even more quickly
in future. "We have significantly heightened the stress levels which we
use in our analytical models and increased the frequency of our reviews of
rated transactions. We have also undertaken a survey of originators and their
practices, particularly in relation to data integrity and the ability to detect
and manage fraud in the origination process. In sum, we recognise that we need
to focus on the transparency of what we do and to continuously enhance our
analytics and process."
To view a copy of Standard & Poor's submission to the UK's House of Commons
Treasury Select Committee, please click here.
Press Office Contacts:
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media_europe@standardandpoors.com
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP),
is the world's foremost provider of financial market intelligence, including
independent credit ratings, indices, risk evaluation, investment research and
data. With approximately 8,500 employees, including wholly owned affiliates,
located in 21 countries, Standard & Poor's is an essential part of the
world's financial infrastructure and has played a leading role for more than
140 years in providing investors with the independent benchmarks they need
to feel more confident about their investment and financial decisions. For
more information, visit http://www.standardandpoors.com.
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