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September 17, 2021

France may maintain the AAA rating

Rating agency Standard & Poor’s showed yesterday it is confident that France’s AAA credit rating will be maintained, a week after rumours hit the market that the country could face a downgrade, the BBC informs.

Earlier this month, S&P cut the credit rating of the US from AAA to AA+ for the first time in its history.

Also on Thursday, French Budget Minister Valerie Pecresse said that France would look at plans to tax the rich more heavily. Pecresse told BFM radio the government was working on a “contribution” from taxpayers earning more than EUR 1 M per year, but said it was not yet clear if the tax would apply directly to individuals or to the companies paying their salaries. The plans are part of a package of measures aiming to cut France’s public deficit, which the government is set to unveil on 24 August.

Meanwhile, the US Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, The New York Times informs. The investigation was generated by two people interviewed by the government and another briefed on such interviews.

The investigation into Standard & Poor’s began before the company cut the United States’ triple-A credit rating this month. Still, it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.

In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.

It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.

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