Even as rating agencies attempt to improve their image, an industry group of investment professionals said they need to take further steps to ensure the credibility of their work.
The comments followed a poll by the CFA Institute in which 11% of respondents said they had "witnessed a credit rating agency change a rating as a consequence of pressure or influence from an investor, issuer, or underwriter."
The poll and subsequent comments come at a time when the rating agencies have come under fire for their role in rating subprime mortgage-backed securities and other structured finance products. As the rating agencies have updated their models to reflect worse-than-expected losses, bond insurance companies and financial service firms have had to write down billions of dollars in losses.
"At the very least these results suggest that the [credit rating agencies] have more than just a perception problem about their processes and integrity, which much be addressed," James Allen, director of CFA Institute Centre's capital markets policy group, said in a statement.
The CFA Institute posed the question in a monthly e-mail to members of the group, which represents more than 95,500 investment professionals worldwide. Of 1,956 respondents, 211 said they had seen a credit ratings agency change a rating under pressure or influence.
Those exerting pressure were more likely to intimidate rating agencies than bribe them, according to the poll. Just 17%of those who had seen ratings changes saw it under the promise of more business, while 51%said they had seen it when someone threatened to take business away.
The poll did not ask respondents to clarify when and where they had seen the pressure, so it's unclear how recently the incidents happened and on what forms of debt they occurred. In addition, market participants questioned the depth and municipal market impact of the survey.
Richard Larkin, now head of research at Herbert J. Sims & Co., said that outside of a formal appeals process in which old information was clarified or new information presented, he never saw an issuer successfully use its influence to get its rating changed when he worked in public finance at Standard & Poor's and Fitch Ratings.
"There have been times when an issuer has tried to put pressure on. Does it ever work? I don't think it's ever changed a rating," Larkin said. "Ratings agencies have pretty thick skins. They're not going to back down because someone is trying to make their life miserable."
Still, the survey results show that even if rating agencies are playing by the rules, the public still has questions about their credibility. Fifty-five percent of respondents said the ratings agencies should form a "self-regulatory" organization to monitor the market.
"Clearly there's a weak perception of rating agencies in today's market, though I am confident they do the best job possible with the information they have," said Guy LeBas, fixed-income strategist at Janney Montgomery Scott.
In a statement, Standard & Poor's president Deven Sharma said his company's "reputation for independence" is its "most valuable asset" and noted the company has undertaken a number of reforms to ensure the credibility of its ratings. Among other changes, the company has recently announced it will implement an analyst rotation program, review the work performed by analysts who leave the firm for employment with issuers or advisors, and subject itself to third-party compliance reviews.
In addition, a recent agreement between all three major ratings agencies and the New York attorney general's office sought to address some of these issues in the ratings market for residential mortgage-backed securities. As part of the deal, rating agencies will receive a fee-for-service from investment banks whether or not the agency is eventually selected to issue a rating on the RMBS.
