Ratings agency fined $1.4bn for its role leading up to global financial crisis
STANDARD and Poor’s has become the first credit ratings agency to be fined for its role leading up to the 2007 financial crisis after negotiating a $1.4bn (£920m) deal with US regulators.
The US Justice Department filed civil fraud charges against S&P in 2013 and accused the company of misleading investors by rating complex securities such as Collateralized Debt Obligations (CDOs) as AAA, knowing the products contained sub-prime debt.
It was also alleged S&P failed to be impartial by failing to disclose its close links with the investment banks that issued the securities.
Attorney General Eric Holder said: “On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised.
“As S&P admits under this settlement, company executives complained that the company declined to downgrade underperforming assets because it was worried that doing so would hurt the company’s business.”
Holder said the firm was complicit in contributing to the worst financial crisis since the great depression by encouraging financial institutions to buy the toxic assets.