The big three American credit rating agencies, Standard & Poor's (S&P), Moody's, and Fitch Group, have been accused of fueling the global crisis. While they are meant to provide investors with reliable information on the risks of various financial products, the agencies were accused of defrauding investors by offering overly favorable evaluations of insolvent financial institutions.
American ratings agency Standard and Poor's (S&P) has been accused of
deliberately weakening its risk assessment criteria to prop up the ratings of some debt products ahead of the 2008 economic crisis.
S&P is being sued for at least $150 million by two local governments and two pension funds in Australia, Reuters reports. The claimants say they lost money on synthetic collateralized debt obligations (SCDOs) in the aftermath of the financial crisis, triggered by bad mortgage loans in the United States. They accuse the ratings agency of
"flawed" assessments of these instruments.
"As a result of these various flaws the ratings assigned were false, misleading and the applicants suffered large losses when the claimed SCDOs defaulted," Noel Hutley, barrister representing the councils told the Federal Court in Sydney, as quoted by Reuters.
If the agency is found guilty of weakening its criteria, it is likely to face lawsuits from other investors.
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