Feeds

Moody's to fix sub-prime computer error

CCC rating (That's Credit crunch computer cock-up)

Next gen security for virtualised datacentres

Moody's, the ratings agency, is reviewing its computer models and setting up a central monitoring system after admitting that a bug led it to incorrectly grade several European mortgage debt instruments.

The agency admits that it incorrectly gave its highest AAA rating to about $1bn worth of European "constant proportion debt obligations". Triple-A ratings are required before many investors like pension funds are allowed to invest.

Following a review of its processes Moody's found that its staff had not acted to cover up the error with the modelling. But it found some members of the monitoring committee had broken Moody's code of conduct.

Moody's said: "Specifically, some committee members considered factors inappropriate to the rating process when reviewing CPDO ratings following the discovery of the model error. According to Moody's Code of Professional Conduct, a committee may consider only credit factors relevant to the credit assessment and may not consider the potential impact on Moody's, or on an issuer, an investor or other market participant."

The company has started disciplinary proceedings against some staff. It has reviewed all CPDO ratings. It is checking existing models and so far has found no errors. It will continue to independently monitor ratings.

But the FT, which first reported the bug, claims to have seen documents which reveal three dozen other bugs in a core computer model used to rate structured products. Moody's told the paper that the bugs related to beta versions of the application which was not used to actually rate any products.

Moody's is facing legal action from several investors, including the Teamsters Pension fund, for misrepresenting bonds which were dependent on sub-prime mortages. ®

The essential guide to IT transformation

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Microsoft cries UNINSTALL in the wake of Blue Screens of Death™
Cache crash causes contained choloric calamity
Munich considers dumping Linux for ... GULP ... Windows!
Give a penguinista a hug, the Outlook's not good for open source's poster child
Time to move away from Windows 7 ... whoa, whoa, who said anything about Windows 8?
Start migrating now to avoid another XPocalypse – Gartner
You'll find Yoda at the back of every IT conference
The piss always taking is he. Bastard the.
HANA has SAP cuddling up to 'smaller partners'
Wanted: algorithm wranglers, not systems giants
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Solving today's distributed Big Data backup challenges
Enable IT efficiency and allow a firm to access and reuse corporate information for competitive advantage, ultimately changing business outcomes.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.