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Credit Rating Agencies under scrutiny - FERPI communicators and FeBAF financiers launch public debate on CRA phenomenon in Milan

April 27, 2012

 

Credit Rating Agencies (CRAs) are service providers specialising in the assignment of credit ratings. On a global scale, the three main agencies are Standard & Poor's, Moody's and Fitch, between them covering approximately 95% of the market.

 

CRAs play a crucial and quasi-regulatory role in today’s financial markets. Their seals of approval have reached a huge importance not only for the market and the voluntary reliance they have got, but also for many mandatory standards that hinge on them.

 

With reference to the European environment, and despite the adoption of recent legislation on credit rating agencies, current developments in the context of the euro debt crisis have shown some weaknesses in the continental regulatory framework. Thus, the European Commission has put forward proposals to toughen that framework further, and tackle issues such as: sovereign ratings; investors' over-reliance on ratings; conflicts of interest; and the liability of CRAs.

 

According to the Italian financial industry, represented by FeBAF (Italian Banking, Insurance, and Finance Federation), the three watchwords for the reform of CRAs have to be responsibility, competition, and transparency.

 

These same key factors may be examined under a communication and public relations perspective, which – apparently - has not been sufficiently examined. CRAs turn out to be a decisive phenomenon for scholars and for a wide array of professionals involved into the rating process. This short article is not the place for stakeholder mapping, however, a simple list of categories interested in the rating "game" includes: issuers (corporate or sovereign entities whose performances or bonds come under scrutiny), banks, investors, CRAs, insurance companies, asset management corporations, analysts, regulatory and supervisory agencies, law firms. The list could continue and comprise other primary, secondary, and key stakeholders, depending on concrete circumstances. Each mapping will always include press, and PR professionals. The rating process is strictly intertwined with news making and news management because of the disclosure proceeding accompanying the assignment. Public relations managers – not only media relations specialists - are, thus, deeply involved as well as journalists: they still play a role of gatekeeping, and their third party endorsement looks pivotal, despite the current critiques of this scientific category. Last but not least, the “news metrics” issue. How not to consider the impact of news on stock prices?

 

This is why FERPI – the Italian Public Relations Federation- and FeBAF decided to deepen specific aspects between rating and public relations. The two Federations are an ideal partnership to study the rating phenomenon under both a scientific and practical approach. The first step they’ve taken is a public debate during the Salone del Risparmio, the main public event in Italy on saving and finance organized by Assogestioni, the asset management association. The event took place on April 20 in Milan, and involved representatives of CRAs, media, and PR professionals. Since public relations does not only refer to media relations, in FERPI and FeBAF common intentions this event is a starting point of a wider debate and multistakeholders platform aimed at engaging other influencers and enhancing quality of relations and markets' transparency.

 

 

Gianfrancesco Rizzuti

FeBAF - Head of Communication

FERPI member

Adjunct Professor of Economic and Financial Public Relations – Università Europea di Roma