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SEC’s Move Against S&P Threatens Ratings Shopping

Agency may suspend S&P from grading commercial mortgage-backed bonds.

By Matt Robinson and Sarah Mulholland, Bloomberg | Updated on December 10, 2014

The U.S. Securities and Exchange Commission’s potential suspension of Standard & Poor’s from grading commercial-mortgage backed bonds would threaten a practice regulators have blamed for fueling the credit crisis.

The SEC has been investigating whether the firm bent ratings criteria to win business in 2011, according to a person with knowledge of the matter, who asked not to be named because discussions between the agency and S&P about a possible suspension are private. In a practice known as ratings shopping, banks often seek assessments from several credit graders and choose the ones that give the most favorable views when assembling asset-backed bond deals linked to everything from auto loans to mortgages.

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