S&P boss acknowledges criticism
It may take as much as two or three years for major ratings houses to make up lost ground with respect to the structured finance business, according to the president of Standard & Poor’s, Deven Sharma.
Sharma told a Reuters Investment Outlook Summit in New York that to make up for lost revenue, S&P would be looking for growth in emerging markets such as Asia, the Middle East, South Africa and Dubai, as well as new rating business in the loan market.
“Will new business completely make it up?” Sharma asked. “It will be in the order of a few years and the business will not be recouped this year.”
Sharma also sought to defend the role of ratings houses in the sub-prime meltdown but said he understood the criticism of agency rating methods, albeit that their assumptions of a 5 per cent housing price decline in 2004 and 2005 had been widely shared.
He said that few analysts could have predicted the 20 per cent declines that struck the US housing market and that, additionally, many investors just did not understand what a top AAA rating meant for structured finance products, which were complex repackaged bonds.
AUTHOR
Mike Taylor
Recommended for you
While M&A has ramped up nationwide, three advice heads have explored Western Australia’s emergence as a region of interest among medium-sized firms vying for growth opportunities in an increasingly competitive market.
The Australian Financial Complaints Authority has reported an 18 per cent increase in investment and advice complaints received in the financial year 2025, rebounding from the previous year’s 26 per cent dip.
EY has broken down which uses of artificial intelligence are presenting the most benefits for wealth managers as well as whether it will impact employee headcounts.
Advice licensee Sequoia Financial Group has promoted Sophie Chen as an executive director, following her work on the firm’s Asia Pacific strategy.
