NEW YORK, May 7 (Reuters) – Moody's Corp (MCO.N: Quote, Profile, Research) said on Wednesday that Brian Clarkson will retire as president and chief operating officer of Moody's Investors Service, which is under fire for assigning high credit ratings to mortgage and other securities whose value later collapsed.
Clarkson, 52, will remain with the company through the end of July. He will be replaced as COO by Michel Madelain, also 52, who has been Moody's executive vice president of global fundamental ratings.
Raymond McDaniel, chief executive of Moody's Corp, will become president of the rating agency, the New York-based company said.
Moody's announced the departure of Clarkson fewer than nine months after Standard & Poor's, a unit of McGraw-Hill Cos (MHP.N: Quote, Profile, Research) and Moody's main rival, replaced Kathleen Corbet as president, installing Deven Sharma.
Like S&P, Moody's has been criticized for assigning high ratings to complex securities, including debt comprised of subprime mortgages, only to rapidly downgrade such securities as credit markets tightened and the housing slump deepened.
“It's an indicator of a major change at Moody's, and a major retrenchment from structured finance,” said Joseph Mason, an associate professor of finance at Drexel University in Philadelphia, who has studied the industry.
“Clarkson was a driving force at Moody's for structured finance,” he added. “I think this is a de facto admission that Moody's cannot accurately rate asset-backed securities, especially subprime mortgages.”
Investigators from Congress, the U.S. Securities and Exchange Commission and various state attorneys general are examining rating agencies' practices. Another major rival is Fitch Ratings, a unit of France's Fimalac SA (LBCP.PA: Quote, Profile, Research).
“Rating agencies have been subject to a lot of criticisms,” Moody's spokesman Greg Jonas said. “Some have been about the ratings themselves, and others have been about the rating agencies. Brian Clarkson concluded that in such an environment, it was a good time to turn the leadership over to someone new.”
Jonas said the decision to leave was Clarkson's alone. Clarkson, Madelain and McDaniel were unavailable for comment.
Clarkson has worked for Moody's for 17 years, during which he has overseen structured finance, project finance and municipal finance ratings.
Last month, Moody's Corp reported a 26 percent drop in quarterly revenue, hurt by plunging demand for credit ratings For details click on [ID:nN23322262]. Revenue from structured products such as collateralized debt obligations, which are often tied to mortgages, slid 57 percent.
As executive vice president, Madelain was responsible for global company and government ratings, including corporate finance, financial institutions, municipal finance and infrastructure finance.
By Dena Aubin and Jonathan Stempel