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Downgrading Rating Agencies

Even with reform, rating agencies have a long way to go to regain their credibility, leaving treasurers to fend for themselves on credit assessments.

By Richard Gamble | Updated on August 02, 2010

As the federal government crafts landmark financial reform, the debt rating agencies–especially Moody’s Investors Service, Standard & Poor’s and Fitch–have targets pinned to their chests. For corporate treasurers, what happens to the agencies they rely on to rate their public debt and provide recognized standards for investment policies is a big deal. For better or worse, both market pressures and legislative mandates are forcing reform. So how do forward-looking treasury staffs react?

They decrease their reliance on agency ratings for investment policies. For too long, treasury staffs have neglected credit analysis for their cash investments and relied almost exclusively on agency ratings, says David Stowe, a director and practice leader for financial risk management at Strategic Treasurer in Atlanta.

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