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Moody's hit by report of computer coding error

21 May 2008  |  9546 views  |  0 call centre Customer assitant

Credit ratings outfit Moody's has launched an external review following reports that it awarded incorrect ratings to billions of dollars of complex debt products due to a computer coding error.

Moody's stock fell almost 16% to $36.91 following a Financial Times report stating that the company awarded incorrect triple-A ratings to "constant proportion debt obligations" in 2006 due to a bug in its computer models.

The FT says internal Moody's documents seen by its reporters show that some senior staff at the credit agency knew early in 2007 that products rated the previous year had received triple A ratings and that, after the computer coding error was corrected, the ratings should have been "up to four notches lower".

After discovering the error early in 2007, Moody's corrected the coding proble and implemented methodology changes, says the FT. But the products remained 'triple A' until January this year when they were downgraded several notches, says the report.

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