Photo: Flickr Chris Griffith
We’re increasingly baffled by Standard & Poors Ratings ServiceAt a time when credit ratings are being watched like a hawk, the company — which is part of a government-endorsed oligopoly — has made a few major screw-ups.
S&P’s most recent transgression was a typo in a release yesterday about an upgrade in Brazil’s sovereign credit rating. Its rating had been BBB- and the release marked a ratings upgrade (in truth to BBB). However, the release mistakenly said the country had been upgraded to BBB-.
Had this been an isolated event, it wouldn’t have been a huge deal, but the Brazil case was actually minor compared to other gaffes.
Last week, an automated email sent to a listserv falsely stated that France had been downgraded, leading to skyrocketing yields on sovereign bonds. While S&P later clarified what had happened, the damage was done; even though yields dropped, everyone now remembers that the prospect of a France downgrade is very, very real.
Scrutiny about S&P’s reliability has been ongoing since August, when the agency cut the United States’ sovereign rating after committing a maths error amounting to “trillions” of dollars. Even though it acknowledged the error, the agency chose to “revis[e] its rationale” rather than take back or further investigate its decision. This gaffe raised doubts about the rating agency’s reliability as well as its political motivations.
When the entire world is watching sovereign ratings there is no room for error from a rating agency, much less the stupidity of a flawed automated email system. It is ridiculous that a company which exhibits such incompetence could be responsible for the fate of countries.
UPDATE: S&P ultimately responded to our requests for comment about these errors. They responded by describing the problem and saying only, “We regret this occurred and are taking steps to prevent such an editing error from happening again.”