S&P Barred from Rating Conduits: One Year

For years now, there has been talk of S&P lowering their rating standards. If you've forgotten, after the housing bust, there was a decent amount finger pointing in the direction of the rating agencies, with particular focus on S&P.

Because the rating agencies are hired and paid by bond issuers, the agencies have an incentive to give better ratings than their competitors. Because of S&Ps misconduct, they are barred from rating CMBS conduit deals.

Its single-borrower business and existing ratings won’t be affected. The regulator late last year was negotiating terms of a settlement over alleged violations of federal securities laws when it rated six CMBS deals that were issued in 2011. The worry at the time was that the SEC would suspend S&P from rating all CMBS business. But that’s considered unlikely. As it is, S&P hasn’t rated a new-issue CMBS conduit transaction since last June.