An insight into the life of a ratings agency employee

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Ratings agencies are relatively voluminous employers of graduates and have formal training programmes across multiple divisions. There’s a description of what they do here.

A more pessimistic view of the industry comes from the ever-excellent blog from non-fiction author Joris Luyendijk in the Guardian, in which a former ratings agency employee explains how he is “genuinely frightened” about the current state of play. Here are some salient points:

1. Ratings agencies haven’t had to evolve since the 2008 crisis

“Everybody pretends it's all OK. Sometimes I feel finance has reacted to the crisis the way a motorist might respond to a near-accident. There is the adrenaline surge directly after the lucky escape, followed by the huge shock when you realise what could have happened. But then, as the journey continues and the scene recedes in the rearview mirror, you tell yourself: maybe it wasn't that bad. The memory of your panic fades, and you even begin to misremember what happened. Was it really that bad?”

2. It’s gone from being studious to a corporate occupation

"The big change in rating agencies started around 10 years ago. Before that time Moody's was seen as boring, quiet, nerdish. Analysts there were seen as researchers, studious types. Then new management came in and they threw this out of the window. They pushed a culture that was driven by a desire to just keep rating. And they hired people that reflected their thinking.

"Imagine you are a rating agency and you see this new product coming in. You realise: if we rate it, we can keep on rating products like it, as this is the beginning of a continuing stream. And a huge stream it was: thousands and thousands of products offered for rating – and each for a fee.”

3. The work is increasing, but headcount isn’t

“Rating agencies senior management have become so focused on the bottom line. There's constant cost-cutting. Demanding more from fewer and fewer people. Obviously, the quality of a rating declines when there's less time to study a company and its business plan. In my time at the company, there'd be no paid overtime, no time off after you worked through the weekend, let alone a word of thanks.”

4. Rating agencies are consistently under-staffed

“Young analysts are much cheaper than experienced ones. And giving people a thorough training again costs money and takes a long time. If you're young, you will assume that what you've seen until now in your life is 'normal', when it might not be.”

5. There’s a lack of clear strategy about where they want to be

“Two heads of department in my agency had their department organised out of existence overnight. A little while later, one was resurrected when top management realised what it had done.”

6. They must spend time asking more questions about complex products

“I am genuinely frightened. What are the ratings agencies missing at the moment? What are the companies that they're rating developing? What's the next miracle financial product and how badly is it being misunderstood?”

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