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Was Moody’s fined for ‘fraud ratings’ leading to market collapse during US financial crises? 

Moody’s, the global rating agency, has been fined in the US, Europe and Hong Kong for ‘rating fraud’

Probe found that Moody’s issued high ratings to sub-prime home loans, which later collapsed in 2007

Moody’s, the global rating agency, has been fined in the US, in Europe and in Hong Kong for ‘rating fraud’, and all during the last year and a half. Regulators in the United States, Europe and in Hong Kong have questioned the integrity of the process and imposed heavy fines on the agency.

According news website ENCA, ratings agency Moody’s had agreed to fork out $864m in penalties for its role in the US 2008 financial crisis. A probe had found that Moody’s issued high ratings to sub-prime home loans, which later collapsed in 2007.

The guardian reported that ‘credit rating agency Moody’s had agreed to pay nearly $864m to settle with US federal and state authorities over its ratings of risky mortgage securities in the run-up to the 2008 financial crisis.

“Moody’s reached the deal with the justice department, 21 states and the District of Columbia, resolving allegations that the firm contributed to the worst financial crisis since the Great Depression, the department said in a statement.”

Subsequently, in April, 2016 a Hong Kong tribunal upheld a penalty of 1.4 million HK Dollars on Moody’s Financial Service for similar reasons.

US Justice Department had said in a statement in January, “Moody’s failed to adhere to its own credit-rating standards and fell short on its pledge of transparency in the run-up to the ‘great recession’.”

Moody’s, it had said, was fined for issuing false credit ratings that eventually led to the market crash.

In June, 2017 Europe’s markets watchdog imposed a penalty of 1.24 million Euros on Moody’s for “not adhering to the correct rating protocol”.


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