We were wondering how long Europe's insolvent, and very much scorned, banks would take the constant downgrade abuse (or reacquaintance with reality as we like to call it, but that is irrelevant) by the rating agencies without retorting. After all the same organizations that allowed bank "credit analysts" to pretend they did work for years, when they all merely fell in place in some lemming-like procession, patting each other on the back, pocketing record bonus after record bonus and praising groupthink encapsulated by the made up letters AAA, are now largely non-grata first in Europe, and soon, following the imminent downgrade of American banks, in the US as well. It appears that the response is finally coming. Sky News reports that "some of Europe's largest banks are intensifying discussions about a move to reduce their co-operation with the big three credit ratings agencies amid widespread dissatisfaction with their decision-making." After all, when all they do is downgrade, as opposed to the old standby, upgrade, who needs them. In fact, why not just shut their mouths entirely. Sadly, this is precisely what is on the horizon.
From Sky News:
I have learned that finance directors and other executives from about a dozen of the Continent's biggest lenders held talks on the issue during the Institute of International Finance in Copenhagen last week.
I'm told that the discussions did not result in a formal decision to reduce the amount of information disclosed to Fitch, Moody's and Standard & Poor's, but one source familiar with the talks said today that "things are certainly moving in that direction".
The judgements of the dominant trio of ratings agencies have been questioned repeatedly as the Eurozone crisis has deepened, triggering downgrades of numerous European governments and major banks.
Moody's is expected to announce downgrades to the ratings of British banks including Barclays, Lloyds Banking Group and Royal Bank of Scotland in the next few days.
One senior bank executive put it like this to me: "The ratings agencies got it horribly wrong on the way up; there are lots of reasons to suppose they are getting it wrong on the way down."
They sure do: somehow they still rates banks in Europe higher than a D, when even blind chimps with typewriters would have no problem finding the correct key on the keyboard to describe the true solvency state of the continent's banking system.
In the meantime, the boycott of anyone who dares to write adversely of banks is coming. Because you see thair "assumptions" are wrong.
In an ideal world only banks, and specifically the same analysts who previously had relied solely on the rating agencies to do their work for them, should rate other banks. And the range of recommendations should range from Buy to Very Strong Buy only.
Anything below that should be forbidden by the respective constitution, of the US, and of the soon to be Federal German States of Europe next.
All of the above notwithstanding, the only real rating agency out there with some integrity was, is and will continue to be Egan-Jones. All else are merely fluffers for the largest paying client.