Tuesday, March 17, 2009

rating agencies (1)

the role of external rating agencies ,such as Standard &poors and moody is ,has become increasingly and steadily more important to banks in their evaluation of larger corporate credits . the original role of the rating agencies role of the rating agencies was to provide credit assessment for individual investors in commercial paper and corporate bonds issued BY LARGE CORPORATIONS .such investors lacked the banks knOWLEDGE AND SKILL IN CREDIT ASSSESSMENT AND NEEDED OBJECTIVE and professional credit analysis af the risks in volved in these financial instruments ,which were aimed at replacing bank lending as part of the process of disintermediation through which large corporates sought to reduce their borrowing costs .
many senior bankers,despite the capacity of their highly professional credit risk evaluators ,favour the Judgments of the rating agencies where the assessment of large corporates is concerned .the reason for this is that the rating agencies are perceived to be able to obtain asuperiorlevel of information than any single lender because they get privileged access to corporates . large companies have to satisfy if they want to achieve ahigh rating and thereby lower borrowing costs . they are , therefore, under more pressure to co-operate with them than they might with individual banks that can be played off against one another in the limiting of information availability .

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