i'm responsible for the sovereign ratings at fitch, not for all of our banking. >> can i ask one final question? >> very briefly. >> fitch as an organization what did it rate uk back in 2007? >> i'm not in a position to -- tell you. >> absolutely useless. >> these are issues which you are not directly responsible, as i understand it? >> and that is correct. >> yes. >> george. >> i'm the good cop. right. you've got a fairly dismal report with -- the last inspection. inadequate transparency of methodology. problems with disclosure of presentation and ratings. inadequate government

arrangements. inadequate resources supporting ratings. and the use of new and experienced staff on too many occasions. apart from that, was everything else all right? now were these criticisms justified? >> i can speak to the on-site inspection conducted at fitch with respect to sovereign ratings. we had detailed discussions and reviewed our files while on-site. my understanding at the time of that inspection was that broadly speaking, that the -- what they were doing to procedures and regulations that they were reviewing, my understanding is that we are still waiting as ratings agency the detailed feedback from asmer. if we need to address, we will address them. >> are you not aware then of

these findings? is that what you're saying, or you knew of them, but are waiting for a detailed official formal letter? >> i think the -- i'm certainly aware and have read the report that i believe you're referring to, which i'd like to kind of, a generic overview of the three -- >> all at table. it's either one or two of you that fit into this, but do you think they're justified? >> and i think i've highlighted a number of potential risks relating to things like resources. as you've highlighted. which we recognize as potential risks and if it's identified that there's a shortcoming on the side of fitch, we would address those. i think they're highlighting potential shortcomings and risks, was my understanding, rather than saying that these

are, is systemic shortcomings in the conduct of the rating agencies with respect to the regulations that asmer is governing the rating agencies. >> i'm not sure -- i take you up on that. i'm not sure of the potential of what they found, nothing potential about that. systemic is another question, but they raised important points after the inspections and indicated that one or more of the three of you were guilty, were found wanting in these areas. there's nothing potential about it. >> well, can i speak to fitch and it's my understanding at this point, it's my understanding that the works -- the shortcomings hasn't been undertaken, but i also understand that asmer has yet to release details of all of their

review. >> okay. do you have anything to add? >> it's my understanding that i can talk about the part of the process i was involved in, which was the on-site process, or the sovereign ratings team and i can confirm that asmer did a robust and thorough investigation looking into our files. it my understanding that the final conclusions are still to come. there was an initial draft, that's my information. i believe -- and we take that very seriously from what i took away is that asmer did comment on certain areas of improvement which have to do with recordkeeping, which have to do with areas of sort of recording committee conclusions, which are measured -- which are remarks we take very seriously and have been working on those areas to make sure that this -- >> the four areas i've

mentioned, are you looking at these four areas as a result of your interim knowledge of their findings? >> well, the -- i'm not sure i recall all that you mentioned. i don't think they would be applicable. experienced analysts which i think is the gravest of all concerns here for me about an analytical manager. it's something i would be very worried about. sorry? >> that must have been one of the other two that -- >> well, as i said. i think the final agency by agency conclusions are still outstanding. so i would, from my perspective, i would actually not subscribe to that view. >> so do you want to add anything? >> my personal responsibilities for the rate iing policy, not f communications of regulators. it's rather off my patch. as my colleagues said, these are generic findings.

not knowing precisely what is specific to any rating agency until we see specific findings. >> two questions. one of the important points of methodology and transparency of that, they found credit risk -- continually found medologies for from products continued to be found in multiple documents published in different periods not easily identified on the web pages. it went on to say, medologies published by one or more reviewer on the example, not always provide a clear and exhaustive overview of the criteria and models used and how these criteria contribute to the eventual rating decision. well, that's fairly important, i would assume? >> i think it's an important comment.

i would say to this -- >> they are not guilty. >> well, for the sovereign -- talking about sovereign ratings here. we have one piece of methodology, which is two clicks away from our standardandpoors.com website. and it's something we put out in june 2011, superseding our previous criteria, adding a lot of layers of transparency. >> the methodology i would find it all in one place. not as they're suggesting, broken up? >> you would. >> and you're -- >> i'm nodding because in the case of our sovereign rating in medology that is the case. it reveals across all assets that are rated by each of the agencies, and i don't know. they looked in particular in addition to sovereigns covered bonds and that of banks and inasmuch as the transparency of the accessibility, et cetera,

then we will certainly make changes to make it more accessible and more transparent but with respect to sovereign ratings, we have a single document which sets this out. >> mr. wilson, is this your area? >> not really my area. >> okay. right. that's important, because in all the written evidence, you each get very upset about the commission's three, the commission's further proposals for further action, and one of them is rating agencies will have to seek and receive approval from asmer before making changes to methodologies and criteria and also be required to development a harmonized ratings scale in parallel with their existing ratings scale. so you could be compared.

now, that's one you are getting hot under the collar about. could you just take the opportunity to explain why you are so excited about that? they're simply saying that you should not make any changes without clearing it with the regulator, and secondly, you should run parallel in methodology, transparent model, that is similar to each. so you can be a customer can look at you and see how you are doing. >> yeah. well i think what you're referring to is in the cr-3 legislative proposal. the asmer's power to approve or disapprove of rating change, rating methodology changes. we do indeed believe this would be a negative development. it would -- first of all it would lead to, or be considered undue regulatory influence into the substance of the rating into

the true analytics rather than the processes surrounding the ratings which is actually something that the current regulation of rating agencies precludes. there was a clear division of labor between regulation and analytical work. i think this clear demarcation would fall by the wayside. it would also lead to unintended consequences potentially that what you seem to be worried about, that the rating agency speaks with one voice and why is there three of you or certain of many, if asmer were in a situation to prove certainly methodologists. chances are that the methodologies would be very similar and lead to less diversity of opinions and more allient ratings across the competition, which i think would

be negative for investors, because it would reduce the information available to them. it could also potentially slow down the methodological adjustments to new realities. the methodology is not something that's cast in stone. that is under sort of annual revision at least. sometimes as the case may be, a short notice if the situation changes. if you have sort of a, an approval process, you have to go through, these changes which may be warranted from the analytical point of view may take longer to take and, therefore, reduce the quality of the ratings. it may furthermore, lastly, and i stop after this, it may increase another risk that some -- some politicians are worried about, the overreliance on ratings. if you are an investor and the proved methodology you might think, well, that should be all right and actually reduce the analytical effort rather than increase it, which i understand is the intention of the european policymaker. >> well, just briefly, because i think the arguments have been well set out by mr. kramer.

there is a fundamental principle that is actually recognized in the european, existing european regulatory framework and that is actually maintaining the independence of the rating opinions, and those rating opinions are based on criteria and methodologies developed by each of the rating agencies. so it is a fundamental principle to ensure, you know that we think is -- important to respect and maintain the independence of the rating opinions, and not undermine that inadvertently or otherwise as a result of approval process with respect to what we do. >> if they went ahead with this, what would you do? >> that's a question i generally couldn't answer.

that's a question above my pay grade. >> we would work according to the european regulation. >> i just really want to as a final question, ask all of you, do you understand why politicians and regulators are so concerned about the credit rating agent's impact on government policy and, you know, specifically nicolas sarkozy was quoted in the financial times the only thing he had to worry about was preserving the aaa. you're seeing that as well in uk where you're talking about austerity measures needed to preserve aaa. can you understand why sovereign ratings in particular are treading into very dangerous territory vis-a-vis politics. can you tell me, each of you, are you discussing this at the highest levels in your ratings

agency, and are you taking into account at all going forward or did you previously take into account at all the political impact of the timing and the consequences of your ratings? mr. kramer first. >> yes, thank you very much. the two interrelated questions. let me take them in reverse order about the timing. we hear that regularly. we can understand what you're doing, but why are you doing it now? couldn't you wait until after the summit or after the budget or until after we issued the benchmark next week? the answer to all of this is, no. we have to -- to disclose our opinions on an up to date basis to the marketplace. if our opinions change, then we have to communicate this to the investor community. this is our duty. we're not operating in a

political environment where we're trying to collaborate with the commission on national governments on producing any certain outcomes this is not our role. the rating agency's role is much more limited. this is to opine on forward looking fashion on credit risk. sometimes we agree and sometimes we disagree. on the first part of the question do we take note of political movements of politicians, individual politicians taking ratings as a target for policies. say we want to do, we want to maintain the aaa rating. of course, we noticed that. but we need to understand we're not collaborating with the government in a way to say if you want to keep the aaa rating, what you should be doing is a, be, and c. it's not our role. we could not be possibly in any shape or form in an advisory capacity and afterwards opine on

create risk because we would be part of the process. on the other hand, if there is a government raising the rating as -- on the political agenda, this should not preclude us from playing our role, which is op e opining on credit risk we would say we think that the rating should be lowered by an arch by example, but mr. so and so in government said this would be against the objectives of the government, because this would impede our independence. so the fact that sometimes governments do raise ratings in the official discussion about objectives of the government is something that we note. it's not something we welcome or would have any view on whether it's advisable or not, but it's not that should prevent us from doing the job as we understand it, which is to opine on credit

risk in an indemt fashion. if we were to take that into account as a factor of what you decide and how to communicate it, our independence would start to go on a slippery slope. we want to prevent that at almost any cost. >> okay. just very quickly to come back at you on this point. how often then do you do a review? for example, would you review the british credit rating immediately following the budget announcement as a matter of cause, for example, and in the case of the u.s. if you knew that they were about to renegotiate a debt ceiling, would you then carry out a review in the aftermath of that or do you have a quarterly review? or how does that that work? >> we do respond to events. there's a standard that's being set where you have to have at least sort of one credit committee per year.

there may be appropriate for some sovereigns where there's not much happening. and in some cases, this is the standard that we apply in the cases that you refer to, as you can imagine, these are important events. we would call a committee and deliberate on what the implications are for our review of credit worthiness of the uk or the u.s. so we have credit committees much more frequently in those cases. and whenever the rating changes, we will, of course, within the bounds of the regulation communicate this as quickly as we can. and sometimes if you don't change the rating, we do not communicate it because the day -- every day the rating is not changed, it's affirmed. so the committee concludes if the rating is all right, we don't have to put out a press release. we can choose to do so if

there's investor interest at a particular point in time, but the main obligation is to publish as quickly as we can under our regulatory constraints any rating or changes as they are decided by the credit committee. >> mr. wilson, anything to add to that? >> briefly. we will review it manually whether we would assess the need for a rate in change we have been on the mag nitude of the development. >> is there somebody in moody's whose job it is to keep an eye on the uk and to highlight anything on a minute by minute basis? >> that's the prime responsibility of the lead analyst. it's a responsibility to which the credit -- individuals within moody's will contribute. >> mr. riley? >> yes. i mean, we have a record of

requirements who provide issuers with 12 hours notice of impending action. and there are regulations that obviously govern the disclosure of potentially of information, which also applies to ratings. we're able to meet those requirements and a issue a asked us to issue at the end of the business day, we're able to accommodate that request and we have done so. but where we've had a question of a longer period, that's some things we haven't agreed to because it wouldn't be consistent to us providing market stance for ratings with an up to date view.

>> mr. kramer, if i can take you back to the discussion we had at the beginning of the session, to clarify one point of fact. did you have a rating committee meeting immediately before the u.s. downgrade and then to take that decision and then a second one in order to take account of the american government's response throughout the publication? >> we do have a series of committees on the u.s. that was a fast developing story. it was very frequently. since i was not part of the team visiting the treasury, i would not be 100% certain which lot came first, but it's my understanding if i remember correctly that following the discussions with the treasury in washington, the committee

reconvened. that was the committee that took the final decision on the rating action that was then published. >> that was the committee meeting that took the final decision. that was the committee. >> confirm that to us in writing. i'd g grateful if you would. one other question that's come up quite a bit and the evidence we've taken in the march session. perhaps i could go to you mr. wilson for an answer. a great deal of detail work you're int mating lies behind each of the ratings for the major countries. that research is used to apply the methodology that you have built up, that applies across countries. why not publish all the research? >> we, when ever we take a

rating action, we will publish a press release, which will contain all substantially all of the analysis that has gone into our action. >> is this research behind all that and the heat of ratings work, isn't there? and -- why not publish that? wouldn't that make the underlying opinions, making all that available, wouldn't that encourage investors to focus rather than look at the rating, a point you've all been making to us? >> the full range of research is available. >> but it's not. you meet behind closed doors on the basis of a heap of detailed research. most of which is not published but only the key points as you see it are published. those are subsequently within the press releases, that's correct?

>> we will publish -- >> that is correct. >> by publish we put on our website we have very detailed analyses. we issued quite a detailed comment setting out our views on the ratings. setting out the views on the factors we take into account. on determining the uk's rating. the intention in that it tries to be readable, but detailed information to provide an understanding of our analysis. the intention is to achieve this site to be transparent and open and why we've reached the diss we've reached. >> why not publish all the research and views? >> we have a moody's rating.

it needs to reflect a moody's view. what's most important to us is what we publish makes very clear what the rating is and why it's where it is and what the moody's view is. i think enormous risk off the clarity if we published a range of preliminary research. wouldn't be consistent with that rating. >> i have to say people will find it very bizarre that -- that publishing more material would lead to -- but i want to see where -- >> much of the research is freely accessible. the special reports that we publish in the united kingdom, the u.s., iceland in the past we

would certainly review and be sympathetic to the potential of providing our sovereign research free of charge. though ultimately that's a commercial and upper management decision. i don't have responsibility -- >> i don't want to know about -- >> i'm very sympathetic, we are with the agency, to measures which -- >> more sympathetic than we just heard from moody's. >> would include providing a greater range of research. >> what about publishing the minutes? >> kushtly, we would view current press releases a summary of the key judgments that are being reached twn the rating committee. >> but it's a consensus after the debate's been had. what i'm suggesting is you set out the debate. >> i think that's something

which we can look at and consider. i think there are some difficulties with, with that because when we have debates within the rating committee, first of all, we do sometimes have confidential information which we wouldn't be able to disclose into the public domain through minutes of other research. >> provided by the sovereign. >> provided by the southern authorities that we may disclose sort of feed back we've had in discussions over policy scenarios which again is sensitive for a disclosure. and we want to encourage a rigorous dialogue and debate within the -- within the committee. so potential danger is the publication of minutes. potentially that discussion less

rigorous and robust than it currently is. you could do what the policy committee does in those situations redact slightly the material. have you got views on this? >> yes, i do, mr. chairman. i think two-pronged answer. i think most of it is there. we publish twice a year an all data set that goes into the sovereign ratings. if you look at the methodology and combines of the data that is published by us, which are all our own forecasts which we use as a basis for our decisions the criteria i think an informed observer should be coming pretty close within a notch at least to a sane conclusions that you can make your own assumptions about what you think the indicators would change and what that would

mean for the rating going forward. >> in terms of the minutes, i would echo, it's actually an excellent question which we're asking ourselves repeatedly and discussing internally. it is currently our view and it has been our view for some time. especially in times like these that it might lead to -- if you have the participants -- how they voted -- sorry? >> you can -- you said what? >> you could do that. i believe there is -- i don't think it's so absurd. if you publish for example, all the scores and methodology, what were coming in one way or the other, you would detract if the broader line of argument that we're trying to make.