Fitch rejects allegations in Italy market manipulation probe

MILAN Tue Nov 13, 2012 6:05am EST

The Fitch Ratings building is seen in New York May 7, 2010. REUTERS/Jessica Rinaldi

The Fitch Ratings building is seen in New York May 7, 2010.

Credit: Reuters/Jessica Rinaldi

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MILAN (Reuters) - Fitch Ratings rejected on Tuesday allegations of market manipulation in a landmark Italian probe into a series of downgrades of the country's sovereign credit.

Prosecutors in the southern town of Trani want to put seven current and former employees at Fitch and rival agency Standard & Poor's on trial for allegedly leaking information about their downgrades during market hours, provoking steep losses on Italy's stock and bond markets.

"Fitch Ratings completely rejects any suggestion of wrongdoing in these matters and will defend itself vigorously," the agency said in an emailed statement.

S&P on Monday rejected the claims by the prosecutors. An Italian judge will have the ultimate say on whether to start the trial, which would be the first European court case over sovereign rating cuts.

The case focuses on a series of downgrades that have hit Italy since 2011, including one by Fitch in January 2012.

Prosecutors say Fitch released comments on its upcoming downgrade of Italy before the rating cut was announced.

In Tuesday's statement, Fitch said a possible downgrade of Italy had already been communicated to the market when it placed the country on Rating Watch Negative in December 2011.

Subsequent public comments by Fitch analysts in mid-January merely referred to the December report, it said.

"In keeping with our policies and applicable law, the Italian government was informed of this action," Fitch said.

"We do not understand how these facts could be viewed as market manipulation," it said.

The Trani prosecutors, launching a case which bigger Italian courts have refused to back, probed five analysts from S&P and two from Fitch for alleged market manipulation and abuse of privileged information.

S&P on Monday rejected all the claims made by the prosecutors and an Italian judge will have the ultimate say on whether the trial should go ahead.

The magistrates dropped allegations against peer agency Moody's, saying there was no evidence of "intention to manipulate markets" during the raft of rating cuts that have hit Italy since 2011.

If the Italian case goes to trial it may reshape the long-running debate over liability of rating agencies for their credit opinions at a time of great global economic uncertainty.

"The nature of these allegations give rise to some very serious concerns regarding the ability of credit ratings agencies to produce and publish authoritative, credible opinion, which is free from intimidation or political pressure," Fitch said on Tuesday. (Reporting by Antonella Ciancio; Editing by Hugh Lawson)

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