Training as a CA has many advantages (and a few disadvantages perhaps). One of the advantages is you get skeptical about numbers, and you get to question conclusions/views drawn from numbers. I remember one life insurance company giving me their settled claims to received claims ratio. Smartly it included maturity claims, investment products, pension plans….suddenly I had to sit and clean it.
Similarly once upon a time Crisil had rated Lloyds Finance, Apple Finance and Sundaram Finance – briefly I think Cholamandalam also (not sure) as the AAA companies in the financial service sector apart from Hdfc, Icici, and such other biggies.
To us in the markets this was a joke because Lloyds and Apple would throw money at distributors – per application, contest, etc. At this stage you normally tell people who want to listen – ‘please stay away’. EVEN TODAY they have one product rated so high -but it is not Crisil, and no further comments please.
All this is funny because when you are watching the game – and the scorecard is lying you can only be amused. Then suddenly Apple, Lloyds and a few others got re-rated from AAA to Junk pretty fast – 6 months if I am not wrong, surely less than a year! Tata Finance did not get AAA -but every Amar, Akbar, Anthony and Soli was willing to invest in Tata Finance.
That much for rating agencies. Now banks which do not wish to keep transactions on their books, go to a company have its bonds rated, take it to the market, and then sell it off. The question is ‘Will the Rating stay till I sell the bonds’ – say 90 days? L O L.
A bank should do its own appraisal – there would be more committment.
What should be done with rating agencies? Let them just shut down. R I P. Amen.
see what Morgan Housel has to say about these agencies in the US …somewhat similar thoughts
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