Bond Accountability Commission 2 Recommendations Page 75
rating “recalibrations” to “global” rating scales. The following table contains data drawn from rating agency default risk statistics based upon rating categories90—
Default Risk Rating Categories
An irony, then, as actual experience has demonstrated, is that rating agency practices, together with federal and state regulatory mandates that certain investment companies, insurance companies and other institutional investors invest with an emphasis upon rating categories, rather than upon credit risk, pressured municipal securities issuers to spend large sums to purchase triple-A bond insurance from private companies with
Moody’s Investors Service, “The U.S. Municipal Bond Rating Scale: Mapping to the Global Rating Scale And Assigning Global Scale Ratings to Municipal Obligations” at 6-7 (March 2007) (ten-year “Time Horizons”) (“the global scale [is] used to rate all bonds outside of the U.S. public finance market”); Standard & Poor’s, “Default, Transition, and Recovery: 2008 Annual Global Corporate Default Study And Rating Transitions” at 43-44 (Apr. 2, 2009) (15-year time horizons); Standard & Poor’s, “U.S. Municipal Rating Transitions And Defaults, 1986-2009” at 28 (March 11, 2009) (15-year time horizons). See also Municipal Market Advisors (MMA), “Corporate Ratings for Munis” (Jan. 17, 2008) (citing Moody’s and S&P historical default rates by rating category for municipal and corporate securities). See also beginning at page 96 regarding recent rating agency actions to “recalibrate” municipal securities ratings on “global” scales.
Published on May 14, 2014