Jérôme Cazes, chief executive of Coface, asks for a statistical analysis of ratings performance as a means of exercising “quality control” of rating agencies: In fact, such an analysis is readily and freely available. Standard & Poor’s Ratings Services publishes on its public website an exhaustive statistical examination of the performance of its credit ratings. This looks, among other things, at the correlation between ratings and defaults over time and at trends in downgrades and upgrades of ratings.
These studies show that the long-term track record of S&P’s ratings remains strong. Since 1978, the average five-year default rate for investment grade corporate issuers is just over 1 per cent and for speculative grade companies it is about 20 per cent. That is broadly comparable with the equivalent default rates for structured securities. For the full text of the response click on: Response to Coface 2008-12-22.doc
BIIA Newsletter November 2008 Issue