Moody's Investors Service drew renewed criticism

LONDON, March 12: Moody's Investors Service drew renewed criticism from analysts on Monday after it called a temporary halt to its revision of bank ratings and said it would look again at some of the banks upgraded under its new methodology.

The methodology, which looks at the probability of support from governments if a bank runs into trouble, drew scorn from analysts late in February after it led to waves of big upgrades -- with 16 European bank groups, including Iceland's three major banks, rising to triple-A.

Critics of the policy said it meant Moody's ratings had less value as it was no longer possible to discriminate between banks based on them, and queried the thinking behind rating large numbers of the banks at the same level as, for instance, the U.S. Treasury.

Analysts at Royal Bank of Scotland on Monday described Moody's decision to rethink as ''crushingly embarrassing'' and ''a retreat the like of which (has not been seen) since Bonaparte forgot to pack an extra vest for the Russian winter''.

Dresdner Kleinwort's analysts said in a note to clients the decision to revise the methodology was a ''victory for common sense'' but added that it would have been better if the policy had been thought through before rating changes had been publicly announced.

Moody's said late on Friday it was considering refinements to the methodology, known as joint default analysis (JDA). It said it would resume publishing ratings revisions -- set to affect over 1,000 banks in more than 90 countries -- on March 16.

The credit-rating agency said the refinements would affect prospective bank ratings and a ''select number of recently upgraded banks where there is substantial divergence between the bank's financial strength and its debt and deposit ratings.'' RBS said they expected Iceland's banks -- Glitnir, Kaupthing and Landsbanki, upgraded to triple-A in late February -- to be among those downgraded, along with Hungary's OTP Bank.

Credit default swaps on the three banks rose on Monday, a dealer in London said, and returned close to levels seen justbefore the upgrades.

Five-year protection on Glitnir was at 26.5 basis points, on Kaupthing at 35.5 basis points and Landsbanki at 26.5 basis points, the dealer said.

Officials at Moody's were not immediately available for comment.

REUTERS