The job of assessing risk

Some are now blaming the turbulence caused by the subprime crisis on credit-rating agencies, but this reflects a misunderstanding of the work done by agencies and a misrepresentation of the performance of mortgage-backed securities.

Much of the commentary about the cause of the recent market turbulence has missed several critical facts. For example, our recent downgrades affected approximately 1% of the $565.3 billion in first-lien subprime residential mortgage-backed securities RMBS that Standard PoorÆs rated between the fourth quarter of 2005 and the end of 2006. This represents only a small portion of the mortgage-backed securities market, which in turn represents a very small part of the worldÆs credit markets. Additionally, our recent downgrades included...

FinanceAsia has updated its subscription model. Registered readers now have the opportunity to read five articles from our award-winning website for free. Please subscribe for unlimited access.

Click for more on: assessing | risk

Print Edition

FinanceAsia Print Edition