Moody's Investors Service is taking steps to reveal more of its methodology for rating corporate and sovereign borrowers outside the U.S., in a response to criticism that it is America-centric. The rating agency is planning to soon release a so-called self-assessment report that will detail its European ratings and the processes behind them, as part of a broader goal to demonstrate its methodology and assert the clout of its international ratings, said David Hamilton, director of corporate default research in New York.
Hamilton noted the rating agency has been criticized for being too far removed and the report should put these concerns to rest by revealing the accuracy of Moody's foreign ratings. The report on Europe will come on the heels of a recent report on default and recovery rates in Asia-Pacific that shows the correlation between Moody's ratings and default risk has proven stronger in the region than elsewhere.
"The lowest 10% of all Asia-Pacific ratings has accounted for over 90% of all subsequent defaults within one year, compared to only 70% of all defaults among the bottom 10% worldwide," according to the report, which is meant to validate the rating agency's prowess. Moody's came out with a similar study on its ratings on Canadian borrowers earlier this year.