Italy Takes Ratings Agencies to Court Over Downgrades
ITALY, EUROPE, DOWNGRADE, MOODY'S, S & P, FITCH, CREDIT RATING, CORRUPTION, PROSECUTION, TRIAL
| 12 Nov 2012 | 09:43 AM ET
Prosecutors in southern Italy have asked for seven officials at two of the world's major rating agencies to stand trial as part of a market-rigging probe into the downgrades of Italy last year, Italian tax police said on Monday.
Prosecutors in the town of Trani dropped allegations for two officials at rival agency Moody's, which had been previously targeted in the investigation, police said in a statement.
The magistrates are investigating the agencies for alleged market manipulation and abuse of privileged information over a raft of ratings cuts that have hit debt-laden Italy since the spring of 2011.
Five representatives from Standard & Poor's ratings agency and two from Fitch may stand trial.
A court will be called to decide on the requests.
Prosecutors allege that reports on Italy and its banking system by Standard & Poor's as well as rating agency peer Fitch were in at least one case leaked during market hours, provoking steep losses on the Milan stock market.
The case started last year after prosecutors received a legal complaint from two consumer rights groups.
If the case goes to trial it may reshape the long-running debate over liability of credit agencies at a time of global economic uncertainty.
Credit agencies have already come under fire for not predicting the subprime mortgage debt crisis of 2008-2009.
European policymakers complained the agencies had been too quick to downgrade indebted EU states despite bailouts and painful reforms to contain the euro zone debt crisis.
The agencies, which were not immediately reachable for a comment, have denied any wrongdoing.