MBS Issuers Boycotting S&P

May 2, 2011 by · Leave a Comment
Filed under: Uncategorized 

RBS, Wells Fargo and Bank of America are no longer using Standard & Poor’s to rate their mortgage-backed securities. The core of the dispute is how Standard & Poor’s has chosen to respond to Section 933 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The section holds agencies liable for losses if investors can prove that ratings were not based on reasonable assessments of underlying data.
Whereas all of the leading rating agencies – Moody’s Investor Services, Standard & Poor’s and Fitch Ratings – have sought indemnification in deal documents, Fitch and Moody’s have apparently been flexible while Standard & Poor’s has not.
Standard & Poor’s has gone so far as to claim the right to sue a bank if the agency’s ratings were based on incomplete or inaccurate information about a deal that the bank provided. ABAlert.com quotes a Standard & Poor’s insider as claiming, “We hold them liable for the accuracy of their information…That’s what they really don’t like.”
Standard & Poor’s is now working with the Securities Industry and Financial Markets Association to resolve their conflict with the banks.

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