Maltese still trust credit-rating bodies

While 55% of Europeans have felt their trust in credit-rating agencies decrease, only 22% of the Maltese have expressed the same judgement.

The reputation of these institutions was tarnished in the US and Europe when the media exposed what was perceived as an incestuous relationship with the banks responsible for the financial collapse.

The ratings regularly issued by these financial institutions have been used by both the PN and PL administrations in Malta to celebrate their economic achievements (while both parties in opposition have trumpeted any negative observations).

While 39% of the Maltese have retained the same confidence in credit-rating agencies as before the crisis, 4% have actually seen their confidence increase. But a significant 35% replied that they don't know either way. Only 28% of citizens in all 27 EU member states have retained the same level of trust.

The three largest credit-rating agencies - Standard & Poor's, Moody's Investor Service and Fitch Ratings - are collectively referred to as the "Big Three", due to their substantial market share.

According to the most recent U.S. Securities and Exchange Commission report, the agencies together account for approximately 96% of all credit ratings.

Credit-rating agencies have never been far from controversy: at the turn of the millennium, they came under fire for giving Enron a clean bill of health right up until the company collapsed in 2001.

More recently, they have been subject to criticism in the wake of large losses, beginning in 2007 in the collateralised debt obligation (CDO) market, which occurred despite products being assigned top ratings.

In the US, a Senate report issued in 2010 revealed that the agencies deserved some of the blame for the recent financial meltdown. According to the report, the agencies helped banks disguise the risks of the investments they marketed, selling high-risk securities with low-risk labels.

Malta is one of the few European countries where trust in government, the European Union and financial institutions has emerged unscathed from the global financial crisis, the Eurobaromter survey on the functioning of the internal market shows.

The proportion that says its confidence has decreased is lowest in Malta. This applies to all the institutions and organisations. For example, only 21% of people in Malta say their confidence in national authorities has decreased, only 27% say that they trust national institutions, and only 22% say the same about credit-rating agencies.

While 63% of citizens in all 27 Member States have felt their trust in the financial industry diminish, only 30% of the Maltese share the sentiment.

The majority of EU citizens say that the financial and economic crisis has negatively affected their confidence in various institutions and organisations. Specifically, 64% say that their confidence in their own national authorities has decreased, while 63% say their confidence in the financial industry has decreased. In addition, 55% say this about European institutions and 54% about credit-rating agencies. EU citizens are somewhat less likely to say that their confidence has decreased towards their own banks (41%).

People in Cyprus, Greece and Spain are the most likely to say that their confidence in all of the various institutions and organisations has diminished. For example, the proportion of citizens that say their confidence in European institutions has decreased is 89% in Cyprus, 85% in Greece and 78% in Spain.