S&P Global
 |
|---|
| Standard & Poor's Corporation | |
| |
| Founded | 1941 |
|---|---|
| Headquarters | New York |
| Key People | Neeraj Sahai, President; Pat Milano, EVP |
| Products | Ratings, risk evaluation, indices, research, data |
| Website | www.standardandpoors.com |
S&P Global (formerly Standard & Poor's Corp.) (S&P) provides credit ratings, indices, investment research, risk evaluation and data for investors. The corporation analyzes issuers and debt obligations of corporations, states and municipalities, financial institutions, insurance companies and sovereign governments. It also provides insight into the credit risk of structured finance deals, providing an independent view of credit risk associated with debt-securitized instruments. It is a division of McGraw-Hill Financial.
On November 30, 2020, S&P Global announced it had agreed to acquire IHS Markit for $44 billion, which included $4.8 billion of net debt. The deal, when finalized, will merge two of the largest company providers of data to the financial industry. [1] The European Commission approved the deal in October 2021, on the condition that the S&P sell IHS Markit's U.S oil pricing agency Oil Price Information Service, PetroChemWire and its coal, metals and mining businesses to resolve overlaps in price assessments for oil, coal, biofuels and petrochemicals. S&P had already clinched a deal in August 2021 to sell these assets to News Corp for $1.15 billion.[2]
S&P Ratings and the 2008 Financial Market Collapse[edit]
S&P was among the ratings agencies that were heavily criticized in the aftermath of the 2008 market collapse, for highly rating mortgage backed securities, credit default swaps and other derivatives which were actually high-risk, low-quality investment products. Many in Congress and elsewhere claimed that S&P and other ratings agencies had an inherent conflict of interest, being paid by large Wall Street firms to rate financial products that the firms were selling.
S&P and other ratings agencies defended their ratings practices in the US, claiming they had first amendment, freedom of speech, protections and that their faulty ratings were opinions about various products.[3]
On November 5, 2012, the Federal Court of Australia ruled that S&P and ABN Amro "deceived" and "misled" 12 local Australian councils that purchased triple-A rated products called constant proportion debt obligations in 2006. The ruling marked the first time a credit ratings agency had been brought to a full trial over a structured finance product.[4] [5] At the time, it was thought the Australian court's ruling could open the ratings agencies to further cases in Europe.
On February 5, 2013, the Department of Justice sued S&P for fraud in rating mortgage-backed securities during the years leading up to the financial crisis. The Department of Justice, filing a civil lawsuit in Los Angeles, accused S&P and its parent company McGraw-Hill of three types of fraud. The motive, according to the lawsuit, was to collect fees from firms that were pooling risky home loans into securities. [6] [7]
In a statement, the Department of Justice claimed that several investors, who were also federally insured institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities' true credit risks. The 128-page lawsuit also contains a parody of "Burning Down the House" by Talking Heads. According to the lawsuit, an unidentified S&P analyst, listed in the complaint as "Analyst D", wrote a parody of the song and emailed it to friends. He later sent a video of himself singing and dancing to the song while entertaining coworkers. [8] [9]
In March of 2014, Standard & Poor's asked a federal judge to split up the U.S. government's $5 billion civil fraud lawsuit accusing it of lying about its credit ratings, saying it would be unfair to have to defend against a case of such "unmanageable scope" all at once. In a court filing, the McGraw Hill Financial Inc unit proposed holding a trial in two phases, with the first focusing on just the 17 securities in which Citigroup Inc is alleged to have suffered losses.[10]
In February 2015, S&P agreed to pay $1.5 billion to resolve the allegations that it knowingly inflated ratings of risky mortgage bonds before the crisis. As part of the deal, the government backed off demands that S&P admit to violating laws, reducing the firm’s exposure to future lawsuits.[11]
S&P Downgrades U.S. Credit Rating[edit]
On Aug. 6, 2011, S&P issued the first-ever downgrade of the U.S. credit rating.[12] It proceeded on Aug. 8, 2011 to downgrade the credit ratings of Fannie Mae, Freddie Mac and several other U.S. government entities, reflecting their dependence on federal support.[13]
Standard & Poor's had in April of that year downgraded its outlook for the United States from stable to negative noting the U.S.'s continuing budget deficit, debt growth and it's failure to establish a long-term solution to both issues.[14]
- Over $1.5 trillion in investment assets is directly tied to S&P indexes, and more than $5 trillion is benchmarked to S&P indices - more than all other index providers combined.
- The total amount of outstanding debt rated by S&P globally is approximately U.S. $34 trillion, in 100 countries. In 2006, Standard & Poor's Ratings Services published more than 495,000 ratings, including new and revised ratings.
- The S&P Global 1200 covers 31 markets and approximately 70 percent of global market capitalization.
- Standard & Poor's Equity Research offers fundamental coverage on over 2,000 stocks.[15]
Products and Services[edit]
S&P Dow Jones Indices[edit]
In July 2012, S&P parent company McGraw Hill announced a joint venture with CME Group that created S&P Dow Jones Indices to provide licensing of benchmark indices, including those listed by CME Group - S&P 500 Index, Dow Jones Industrial Average and the Case Shiller Housing Index. Under the terms of the venture, the firm is 24.4 percent owned by CME Group and 73 percent owned by McGraw-Hill, with Dow Jones holding 2.6 percent.[16]
Credit Ratings[edit]
S&P Global provides credit ratings and credit risk analysis. They have credit ratings outstanding on approximately $34 trillion of debt in more than 100 countries.
Fund Services[edit]
S&P's Fund Management Ratings provide insight into the performance of the world's leading investment funds by examining how managers have achieved performance. Extensive fund research for clients and fund shortlists to help clients process fund selection are part of those services.
Equity Research[edit]
S&P's independent equity research covers approximately 2,000 stocks globally. Neither Standard & Poor's nor its parent company, The McGraw-Hill Companies, conducts any investment banking or securities underwriting activities.[17]
Risk Solutions[edit]
Standard & Poor's Risk Solutions address major components of an internal rating system, including tools and methodologies for the analysis of probability of default, loss given default, and exposure at default.[18]
S&P Capital IQ[edit]
In September 2004, McGraw Hill acquired Capital IQ, a data and information analytics firm serving financial institutions. In September 2011, the company rebranded its data services into two "master brands" - S&P Indices (which was subsequently rolled into the S&P Dow Jones Indices joint venture with CME Group, and S&P Capital IQ, which features integrated desktop solutions, data feed services and proprietary market, company and fund research.[19]
History[edit]
Standard & Poor's traces its origins to the publication, in 1860, of Henry Varnum Poor's History of Railroads and Canals in the United States, a precursor of modern stock reporting and analysis.
- In 1906, the Standard Statistics Bureau was formed to provide previously unavailable financial information on U.S. companies.
- In 1916, Standard Statistics began to assign debt ratings to corporate bonds, with sovereign debt ratings following shortly thereafter.
- In 1940, municipal bond ratings were introduced.
- In 1941, Poor's Publishing and Standard Statistics merged to form the Standard & Poor's Corp.
- In 1966, The McGraw-Hill Companies, Inc. acquired Standard & Poor's.[20]
Key People[edit]
- Neeraj Sahai, President
- Pat Milano, Executive Vice President, Operation Services
- Rita Bolger, Senior Vice President, Global Regulatory Affairs, and Associate General Counsel
- Paul Coughlin, Executive Managing Director, Corporates and Government Ratings
- James C. Daly Jr., Vice President, Human Resources
- Lou Eccleston, President, McGraw-Hill Financial
- David Jacob, Executive Managing Director, Structured Finance Ratings
- Catherine Mathis, Senior Vice President, Marketing and Communications
- Alex J. Matturri Jr., Executive Managing Director, Portfolio Services
- Tom Schiller, Executive Managing Director, Region Head, Asia-Pacific
- Adam H. Schuman, Executive Managing Director and Associate General Counsel
- John Weisenseel, Senior Vice President, Finance
References[edit]
- ↑ S&P Global Agrees to Buy IHS Markit for About $44 Billion. WSJ.com.
- ↑ S&P Global and IHS Markit get green light from European Commission for $44 billion megadeal. The Trade News.
- ↑ Court Papers Undercut Ratings Agencies' Defense. New York Times.
- ↑ S&P found guilty of misleading investors. FT.
- ↑ Councils win landmark case against Standard and Poor's, ABN Amro. The Australian.
- ↑ Holder Cites `Egregious' Conduct by McGraw-Hill, S&P. Bloomberg.
- ↑ U.S. sues S&P over subprime ratings. CNN.
- ↑ Department of Justice Sues Standard & Poor’s for Fraud in Rating Mortgage-backed Securities in the Years Leading up to the Financial Crisis. Department of Justice.
- ↑ U.S. suit against S&P includes Talking Heads parody. Chicago Tribune.
- ↑ S&P wants to split up $5 billion U.S. ratings lawsuit. Reuters.
- ↑ S&P to Pay $1.5 Billion to Resolve Crisis-Era Litigation. The Wall Street Journal.
- ↑ S&P downgrades US credit rating. Associated Press/Yahoo! News.
- ↑ S&P Cuts U.S. Government Entities. WSJ.com.
- ↑ Standard & Poor's changes US outlook to negative. Risk.net.
- ↑ Overviews. Standard & Poor's.
- ↑ McGraw-Hill, CME Group Start S&P Dow Jones Indices Venture. Bloomberg.
- ↑ "Equity Research”. Standard & Poor's.
- ↑ "Risk Solutions”. Standard & Poor's.
- ↑ McGraw-Hill Launches Major New Brand, S&P Capital IQ, as Master Brand for Its Financial Desktop, Data Feed and Research & Analytics. PR Newswire.
- ↑ "History”. Standard & Poor's.