Italian prosecutors are investigating Standard & Poor’s (S & P) and Fitch credit rating agencies, suspected of manipulating financial markets and abuse of privileged information. The investigation is referring to the downgrade of Italy’s rating in the spring of last year. In another investigation, prosecutors dropped the case against Moody’s for possible market violations. S & P and Fitch were accused of “causing considerable losses on stock, bond and sovereign debt markets”.
S & P rejected the allegations, which it describes as “completely unfounded”, according to Reuters, quoted by the Financial Times.
Prosecutors in the city of Trani demanded Monday that five employees of S & P and two of Fitch to be sued in connection with an investigation of market manipulation, aiming at reducing the rating of Italy made last year by the two agencies, announced Italian fiscal authorities.
A panel of judges will decide in court on the allegations.
S & P announced in a statement that prosecutors’ claims are “entirely baseless and without any merit.”
Moody’s said that it “has always stated that its employees named in this investigation carried out their duties with the utmost professionalism and integrity.”
Fitch also denied any wrongdoing, without providing any further comment.
Prosecutors noted that S & P and Fitch reports on Italy and Italian banking system were “leaked” to the market at least once during the market sessions, causing major losses on the Milan stock exchange. The prosecutors also said that Fitch made public statements about a downgrade of Italy’s debt before the official downgrade.
The investigation began last year when authorities received two complaints from consumer rights groups.
Prosecutors excluded from file two Moody’s officials initially targeted by the investigation, police says a press release.
Credit rating agencies have been criticized by governments and press because they failed to anticipate the global financial crisis of 2008-2009.
In Europe, the agencies are accused of rushing to downgrade countries in difficulty despite external funding programs and harsh austerity measures adopted during the sovereign debt crisis.
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