Tag: stress tests

Sophia Grene

Perhaps it is inevitable that companies continue to perform their core business even after they have spectacularly messed up, but sometimes it does take your breath away.

The temptation to tell ratings agency Moody’s about the beam in its own eye is almost irresistible. Yesterday it downgraded the operational rating of some funds because:

… Marathon’s investment and liquidity risk monitoring processes, although very strong, could be enhanced by incorporating additional shocks into a global stress test. In Moody’s view, such additional stress testing would have strengthened Marathon’s ability to cope with the market dislocation over the past year. Moody’s noted that the quality of all of the funds’ other major operational areas, such as valuation, operations, corporate functions and service providers continue to be viewed as excellent. Moody’s believes the valuation processes and back office operations have functioned particularly well during the recent periods of great market stress.

Moody’s is one of the companies currently being sued for alleged ‘negligent misrepresentation’ in its ratings of special investment vehicles, and part of an industry sector widely blamed for having failed to understand the cumulative impact of the risks it was rating.

The pot is calling the kettle black. And in this case, the pot is the sooty item and the kettle only a little tarnished.

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.

Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.