mercoledì 24 settembre 2014

Trial requested for S&P staff over Italy reports

Rating agency staff accused of market manipulation in crisis

(ANSA) - Trani, September 22 - Prosecutors in the southern Italian city of Trani on Monday asked a judge to send five managers and analysts from rating agency Standard & Poor's and the company itself to trial on allegations of deliberately misleading financial markets with reports on Italy.

The reports in question were issued by the ratings agency between May 2011 and January 2012, at the height of the eurozone debt crisis when Italy looked to be in danger of a Greek-style financial meltdown. They included a report issued on January 13, 2012, in which the United States-based S&P downgraded Italy's sovereign debt rating by two notches from A to BBB+. That same day, S&P also lowered its rating on several Italian banks in findings that another employee at the ratings agency disagreed with in an email, seized by authorities and given to Trani prosecutor Michele Ruggiero.

Standard and Poor's denied the allegations in a statement Monday. "As we have said on many occasions, we believe that the allegations reported have no foundation and are not supported by any evidence. We will continue to vigorously defend our actions and the reputation of the company and our people," the agency said. Two other international ratings agencies, Moody's and Fitch, were also being investigated by prosecutors in Trani, a seaport city on Italy's Adriatic coast.

Complaints against S&P were initially raised by a group of 10 consumers and the Italian consumer association Adusbef. Ratings by the influential international agencies have a significant effect on the cost of borrowing for businesses and government, and also have an impact on the size of government deficit and debt. A judicial decision on whether to send the case to trial is expected on October 28. A similar investigation involving some of the same S&P staff was launched in June 2012 by prosecutors.

At that time, Ruggiero also put S&P under investigation for alleged market tampering but closed an investigation into the ratings agency's Italian offices and the possibility that "false, unfounded or imprudent judgments" unduly affected markets. That investigation gathered steam in January 2012 when investigators searched S&P's Milan offices. Five days later, Ruggiero ordered a search of the Milan offices of Fitch, which had downgraded Italy three days later. A number of plaintiffs, including the United States government, have gone after ratings agencies following the worldwide financial crisis struck in 2007 and was followed by Europe's sovereign debt crisis.

In early 2013, Washington filed for $5 billion in damages from S&P for allegedly understating risks and giving too high ratings to mortgage-related products that contributed to the sub-prime crisis in the US, according to the civil suit. And earlier this year, Italy's State auditor, the Audit Court, was considering a lawsuit against the same three ratings agencies for damages over downgrades of the country's credit rating in 2011, the Financial Times reported. The Audit Court was reportedly considering asking for 234 billion euros in damages over the downgrades, which increased concern about Italy's financial position and contributed to a rise in borrowing costs at the height of the eurozone debt crisis.

The FT said the Audit Court complained that the agencies failed to take account of the important value of Italy's cultural heritage before it downgraded the country's rating. "S&P never in its ratings pointed out Italy's history, art or landscape which, as universally recognised, are the basis of its economic strength," the FT reported, quoting from court documents. S&P dismissed that claim as "frivolous and without merit", the FT said. 

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