IL&FS crisis highlights need to tighten regulation of credit rating firms

In the US, S&P and Moody's had to pay $1.37 billion and $864 million, respectively, as settlements with federal and state authorities in January 2017

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so” — Mark Twain (quoted in the Oscar-winning 2015 film The Big Short)

It’s particularly true of credit rating agencies (CRA). The blowout at Infrastructure Leasing and Financial Services (IL&FS) is the latest to hit the headlines — going to junk status from being triple-A rated in a matter of weeks. Back in 2017, Reliance Communications’ debt was downgraded to default status, two months after failing to service its non-convertible debentures; and still earlier, you had the case of Amtek