A FORMER head of Standard & Poor's in Australia is believed to be considering launching a new credit rating service for retail investment products, after the major rating agencies walked away from the market.
Chris Dalton, the former chief executive of S&P, declined to comment when contacted by Business Day yesterday.
However, he did say: ''I think there's a need for that service to be provided to the market, and I think the decision by the major agencies to restrict their services is not beneficial for the continued development of the Australian debt market.''
Mr Dalton was an 18-year S&P veteran, and was chief executive of the company when he left in July 2008.
Talk of the possible new venture follows the refusal of Standard & Poor's to apply for a retail financial services licence to operate in Australia - a requirement for rating agencies from January 1. Without a retail licence, S&P's ratings would not be able to be used for investment products sold to retail investors.
S&P was dominant in the Australian retail ratings market, and neither of the other two major agencies, Fitch Ratings and Moody's Investors Service, have revealed plans to move into the market, although they will continue to offer wholesale ratings.
Without a resolution to the stand-off - such as a new market entrant - no major agency would be able to rate investment products sold to retail investors by Australian banks and other companies.
S&P's announcement came after the Australian Securities and Investments Commission said it would require rating agencies to approve how their ratings were used, a move aimed to make credit rating agencies more accountable for their ratings.
But S&P blamed its decision on a retail licence requirement to join an external dispute resolution scheme, saying such a move could ''under mine the global consistency'' of its ratings and force it to disclose confidential information.
The development alarmed the banking industry. The Australian Bankers' Association said last month that retail investors were an important source of capital for the banks, and that investors expected offer documents to include ratings.
The association said it was ''very concerned'' by any move resulting in the withdrawal of ratings from the retail market. If the retail market was not available here, it would affect the availability of capital and reliance on wholesale funding by banks.
The credit rating agencies have faced regulatory crackdowns worldwide after they were accused of contributing to the global financial crisis by giving high ratings to securities backed by US subprime loans.
