The US Department of Justice (DOJ) has warned S&P Global Ratings that it should “carefully consider” how proposed changes to the way it assesses the creditworthiness of bonds owned by insurance companies could harm competition, according to reports from Bloomberg.
In a recent letter, the DOJ’s antitrust division said that a methodology change put forward by S&P “could raise significant concerns” by unfairly inhibiting competitors.
The changes proposed by S&P would place more weight on the bonds within a firm’s and rank bonds rated exclusively by its competitors as less creditworthy.
This could potentially hurt the credit grades of insurance companies that invest in bonds that aren’t rated by S&P.
Accordingly, Jonathan Kanter from the DOJ’s antitrust team warns that S&P should “carefully consider whether penalizing insurers that purchase securities rated by S&P’s competitors has the potential to raise barriers to entry and expansion by competitors, insulate S&P from competition, or otherwise suppress competition from rival rating agencies.”
“Such actions could raise significant concerns that the Sherman Act has been — or will be — violated and warrant additional scrutiny,” Kanter added.
In response, S&P has said it will review the comments to focus on the “analytical quality” of methodology, but added that its “policies and procedures provide a framework that supports our analysts in operating independently of commercial considerations and influence.”
