Sunday, November 20, 2011

Oligopoly in the market for credit rating agencies

"At least one of the three biggest credit-rating companies was hired for 98 percent of municipal bonds bigger than $50 million this year, up from 94 percent in 2007, according to data compiled by Bloomberg. About 99 percent of U.S. corporate issues have a grade from one of the three, compared with 98 percent four years ago, the data show...

The three companies provide 97 percent of all credit ratings, the U.S. Securities and Exchange Commission said in a September report. S&P leads with a 42 percent share, Moody’s holds 37 percent and Fitch, majority-owned by Paris-based Fimalac SA, is at 18 percent...

It’s very hard to convince someone to stop using S&P and Moody’s ratings because they’re such a market norm... If you don’t have one, people will wonder what’s wrong with you."

See more on the distortions in the market for credit rating agencies in this excellent Bloomberg story.

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