Katrina Nicholas and John Detrixhe Singapore and New York
STANDARD & Poor’s (S&P), the ratings agency that downgraded the US’s AAA credit rating for the first time, will replace president Deven Sharma with Citibank chief operating officer Douglas Peterson.
Sharma would leave at the end of the year to “pursue other opportunities”, S&P’s parent, McGraw-Hill, said yesterday. Peterson would take over on September 12 and Sharma would then work on McGraw-Hill’s strategic review.
S&P’s decision on August 5 to reduce the US credit rating to AA+ roiled global markets and boosted demand for US treasuries, sending the yield on the 10-year note, the benchmark for mortgages and car loans, to a record low 2.03 percent.
The company, which was blamed in an April Senate report for helping fuel the credit crisis, was criticised by Warren Buffett, who said the US should be “quadruple-A”.
The cut conflicted with Moody’s Investors Service and Fitch Ratings, which kept their AAA grades.
S&P said the US had failed to meet targets for reducing the budget deficit.
The market value of global stocks tumbled by $7.6 trillion between August 5 and August 12, Bloomberg data show. The S&P 500 index swung by at least 4.6 percent in the four trading days following the change. Gold rose 5 percent.
While S&P said the US was less creditworthy, investors snapped up treasuries, driving up prices and sending yields to record lows. Yields on the bonds fell 21 points to 1.174 percent, according to Bank of America Merrill Lynch’s US Treasury Master index.
S&P’s revenue grew 10.4 percent to $1.7 billion in 2010, from $1.54bn a year earlier.
“It looks like he’s being helped out the door,” Noel Hebert, a credit strategist at Mitsubishi UFJ Securities in New York, said in a phone interview. “If it was a planned retirement, it should have been handled in a different way.”
Peterson was approached by McGraw-Hill in March, a person with direct knowledge of the talks said.
He was chief executive of Citigroup Japan from 2004 to 2010 and was hired by the New York-based investment bank out of business school 26 years ago, according to an internal memo outlining his departure, whose contents were confirmed by Shannon Bell, a Citigroup spokeswoman in New York. – Bloomberg