Consumer Groups May Sue S&P, Moody’s Should They Cut Italy
Two Italian consumer groups said they may sue Standard & Poor’s and Moody’s Investors Service should the rating companies downgrade Italy, saying they aren’t authorized to rule on the country’s creditworthiness.
“Should either Moody’s or Standard & Poor’s downgrade Italy, we would sue them as they don’t have the license to issue ratings on our country and companies operating in Italy,” Elio Lannutti, head of the Adusbef consumer group and a senator with the Italian Values Party, said in an interview in Rome today.
The ratings companies are already facing legal challenges in Italy as prosecutors in the southern city of Trani are investigating statements by S&P and Moody’s on the country’s creditworthiness. S&P and Moody’s placed Italy’s rating under review for possible downgrade in May and June, respectively.
The consumer groups are challenging whether the S&P and Moody’s have the right to rate Italy, saying they lack a license from the European Securities and Markets Authority, the Adusbef and Federconsumatori said today in a joint e-mailed statement. ESMA earlier this year became the European Union’s single regulator of credit-rating companies.
ESMA Chairman Steven Maijoor said U.S. credit-rating companies won’t get a license for the EU unless they abide by the bloc’s rules, Financial Times Deutschland reported on June 23, citing an interview.
Possible Cut
An Italian downgrade is “very likely” as the government failed to restore investor confidence amid rising bond yields, analysts at Bank of America Corp. said in a report today. Downgrades “look probable,” Societe Generale SA economists said in a note to investors this week, citing the poor outlook for economic growth and “uncertainties over the availability of market financing.”
The investigation in Trani focuses on a note issued by Moody’s on May 6 of last year, saying it was assessing the risk of “sovereign contagion” that could affect the banking industries of Portugal, Spain, Italy, Ireland and the U.K. The following day Moody’s said that Italy wasn’t among the countries most at risk from Europe’s spreading debt crisis and its credit outlook for 2010 remained stable. S&P is being investigated for its May decision to put Italy’s rating under review.
“Moody’s takes its responsibilities surrounding the dissemination of market sensitive information very seriously and is cooperating with the authorities,” the company said in an e- mail on Aug. 4. The probe in the southern city of Trani is “without foundation” and the rating company will “strenuously defend its work,” S&P said the same day.
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