Structured profits

7 February 2008 By Richard Beales Follow @richardbeales1

The rating agency s latest governance proposals are helpful. But the public service spin invites scepticism. It s largely about money: structured finance revenues at rival Moody s tumbled 40% last quarter. The problem for investors is that raters still aren t really accountable.

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On February 7, S&P announced new initiatives to enhance governance, analytical quality, transparency of information and investor education.

The same day, Moody's reported fourth quarter and full year 2007 earnings. Raymond McDaniel, chief executive, said the company had confronted unprecedented challenges in 2007. He added: "The severity and protracted nature of current credit market dislocations confirms that the challenges of 2007 will persist well into 2008.

Moody's rating revenue for the fourth quarter of 2007 was $461m, 16% lower than the prior year period. Within that, global structured finance revenue totaled $165m for the fourth quarter of 2007, a decrease of 40%.

Estimating the eventual losses on US subprime mortgages – the catalyst for the credit crunch that began last year – remains a crapshoot, Moody's chief credit officer Andrew Kimball told a conference, according to Reuters.

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