It is the eternal cry when things go wrong: “Something must be done!”

The councils today demanded an inquiry into the ratings agencies. Hazel Blears, communities secretary, swiftly deployed a “rapid response team” to help the 116 councils (at least) who put £858m (at least) on deposit in Iceland.

But the ratings agencies - as we pointed out on Friday - may not be to blame on this occasion.

Standard & Poors says it only ever rated Glitnir and six months ago it downgraded the bank to BBB+ with a negative outlook. “At the time that was the lowest credit rating of any major bank rated by S&P in western Europe,” it points out.

As for Fitch. It first warned of systemic risk in the Icelandic banking sector in March 2006, it says: “The agency has expressed similar concerns in frequent market commentary and rating actions since then.” 

October 14, 2008 5:15pm in Alistair Darling, Banks, Credit Crunch, Recession, UK politics | Comment