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Italy extends probe to Fitch

Jan 24 2012 18:33

Milan - Credit ratings agency Fitch was drawn into an Italian investigation of alleged market manipulation when prosecutors widened a probe beyond its two bigger rivals Standard & Poor’s and Moody’s, an investigative source said on Tuesday.

Tax police visited Fitch’s Milan offices, less than a week after seizing documents at S&P, a senior prosecutor said.

“Men from the financial police are at Fitch in Milan,” said Carlo Maria Capristo, chief prosecutor in Trani.

The source said the investigation by Trani prosecutors was extended to Fitch after its analysts said earlier this month they could downgrade Italy by two notches by the end of January.

There was no immediate comment from Fitch.

European policymakers struggling to contain a debt crisis have grown increasingly critical of rating agencies, saying they have been too quick to downgrade indebted EU states despite bailouts and austerity programmes.

US authorities also reacted angrily when S&P stripped the United States of its cherished triple-A rating last August.

The Trani prosecutors began their investigation last year, alleging that reports by S&P and Moody’s on Italy and its banking system provoked sharp losses on the Milan stock market.

The probe was extended to S&P’s decision to downgrade Italy earlier this month, and now to Fitch’s threatened ratings cut.

S&P, whose Milan offices were searched on January 19, said then it was surprised and dismayed by the investigation, adding the claims were baseless.

Moody’s has said it takes the dissemination of market sensitive information seriously and is cooperating with authorities.

Last week’s search order for S&P’s offices, a copy of which was seen by Reuters, said S&P’s downgrade of Italy’s sovereign rating on January 13 was based on “untruthful, tendentious, incoherent and unfair” assessments and data.

It also said news of the imminent downgrade was leaked when markets were still open.

The rating agencies’ actions and reports on Italy caused “real damage to the financial market, with a slump in the share price of banks and/or of public debt”, the document said.

The probe in Trani, a small town in southern Italy, was opened after a complaint by two consumer groups over the market impact of S&P and Moody’s reports about Italy.

The consumer groups have said they had first contacted prosecutors in Milan and Rome but had been turned down.

Judicial sources said Milan’s chief prosecutor, who on Monday put out a statement to say his office was not investigating S&P in relation to its rating assessments, believed there were not enough information to warrant a probe.

An investigative source said the Trani prosecutors hoped to conclude their probe by the end of January.

credit ratings  |  fitch  |  moody's  |  italy  |  standard & poor's



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