Like the other ratings agencies, S&P’s warnings and sound assessments were nowhere to be found before the global financial crisis,” Tantillo said. “The crisis seemed to catch them as unawares as everyone else...
New York, NY (PRWEB) August 07, 2011
According to Tantillo, ratings agency, Standard & Poor’s decision to strip the U.S. of its Triple A status on Friday was a crude tactic to help restore its tarnished brand image after many high-profile mistakes in the recent past. This tactic will prove shortsighted, Tantillo argues, and may, in fact, even further damage S&P and the entire ratings industry.
“Fact is, it looks like S&P was trying to repair its brand damage by inflicting damage on an obvious target –the U.S. is the prize trophy of the big game ratings world,” said Tantillo. “And over the summer, the U.S. has become especially vulnerable because of all the attention to its deficit and financial situation.”
The three big ratings agencies, Standard & Poor’s, Moody’s and Fitch, have all been struggling to repair their reputations over the past few years.
“Like the other ratings agencies, S&P’s warnings and sound assessments were nowhere to be found before the global financial crisis,” Tantillo said. “The crisis seemed to catch them as unawares as everyone else when they were the ones who should have been keeping watch. Not only that but the perception cast them as co-villains in the crisis, rubber-stamping financial instruments with their approval that ultimately didn’t deserve it. Let’s face it, these agencies were responsible for telling bondholders that bonds they held were essentially risk-free only to have them default.”
But unlike the other ratings agencies, Tantillo said, S&P has now made the risky decision to go on the offensive. The problem with this, Tantillo maintains, is that S&P is doing so more to repair its brand image than out of the core requirements of its brand. These requirements dictate that a ratings agency should be prudent and deal in the facts, not make decisions that seem politically motivated when it comes to how it rates.
“Yes, always keep your brand in mind, but never think that your brand can be repaired or re-positioned on the back of one big move,” Tantillo said. “Brand development takes time. It is always founded on the core qualities of the kind of work that you do. For S&P and the other ratings agencies, this means simply getting consistently better and developing practices with greater integrity.”
“For financial gatekeeper brands, here’s the rule: boring is good; exciting and unpredictable very bad,” Tantillo added.
Tantillo further maintains that S&P’s rash move may even bring the entire ratings agency edifice down.
“Many investors, corporations and governments are getting tired of the fact that they are forced –yes, forced—by legislation to use the services of these agencies in the buying and selling of debt and other financial instruments after years of big mistakes and few consequences to these agencies (mandates still mean they’re paid even when they mis-rate),” Tantillo said. “This might just be the excuse everyone needs to re-examine the ratings agencies’ protected status.”