Ratings Agencies Cut Heads
Standard & Poor's, Moody's and Canada's Dominion Bond Rating Service this week announced they're eliminating more than 500 jobs among them, in response to dwindling issuance of structured mortgage bonds and credit derivatives.
Ratings agency Standard & Poor's will eliminate 172 jobs one day after Moody's announced its own cuts.
S&P's parent, McGraw-Hill, is cutting 3 percent of its staff across the board. The company said the cuts - which will total 611 jobs across all of its business lines, according to media reports - are being driven by an expected decrease in demand for ratings services because of problems in the sub-prime mortgage market.
Earlier, Moody's Corporation announced it would eliminate 275 jobs for similar reasons.
DBRS said it's closing offices in London, Paris and Frankfurt, eliminating 70 jobs - of which 27 are located in Toronto and New York - from its worldwide force of 270. The Canadian rating agency had set up shop in Europe only a year ago, staffing up with analysts and structured-finance quants poached from Moody's and S&P.
"Fitch Ratings, the third member of the big three with S&P and Moody's, is also considering some cuts due to the poor outlook," the Financial Times reports Thursday.
Separately, Fitch said it's consolidating "all non-rating products and services, product development, credit training, and the firm's product sales force" into a new business unit called Fitch Solutions. The new division "reinforces and furthers the independence of the ratings and analytics of Fitch Ratings," the company said. It's also folding its global structured credit ratings subsidiary back into Fitch Ratings. The release avoided any mention of headcount reductions.
Edward Jones Analyst Robin M. Diedrich told the New York Times S&P's reputation has suffered because of its rating of sub-prime mortgages. She also said the SEC's allowing new companies to apply to become ratings agencies has "opened the door for more competition at a time when the reputations of existing agencies (have) been tarnished."
The cuts amount to about 2 percent of S&P's global workforce of 8,500. Reuters quotes company CEO Harold McGraw as saying additional cuts are possible. "Hopefully this does it, but we're prepared to do a third tier if necessary," he told a Citigroup conference in Phoenix.