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How Does Moody’s Know Balance Sheet Of EU Banks? It Doesn’t

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By Douglas A. McIntyre Published
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Moody’s has been called arrogant before. It has misread the value of mortgage-backed securities and re-rated troubled balance sheets of corporations and nations well after the bad news that affects them is out.

Now, the troubled rating agency has offered its opinions on the stress test of the largest bank in Europe. It can hardly say that it has any real knowledge of these balance sheets

Moody’s writes:

Of the 91 EU banks subject to the EBA’s 2011 stress test, Moody’s believes that 26 rated banks have a heightened risk of needing extraordinary external support, as indicated by their non-investment-grade standalone credit strength (standalone bank financial strength ratings at or below D+, mapping to Ba1 on the traditional rating scale). Moody’s expects the banks that fail the EBA stress test will be among those lower-rated banks, or among the non-rated banks included in the EBA stress test.

The European Banking Authority does not know what the final ratings will show. Moody’s, no matter how good its models are, can’t claim it has any credible data that is better.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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