Ever since Standard & Poor’s stripped the U.S. of its AAA credit rating almost two years ago, the unemployment rate has fallen, household wealth has reached a record and the budget deficit is shrinking. More downgrades may be coming, anyway.
The first Basel agreement on global banking regulation, adopted in 1988, was 30 pages long and relied on simple arithmetic. The latest update, known as Basel III, runs to 509 pages and includes 78 calculus equations.
Ratings companies, whose scores have helped determine the cost of money for governments and businesses for more than a century, are no longer trusted by the world’s biggest investors, according to the former head of structured finance at Standard & Poor’s.