The board of ANZ launched an extraordinary attack last week on the agencies, which have been blamed for escalating the global financial crisis.
ANZ chairman Charles Goode said the bank relied too much on the ratings given to US debt products, over which ANZ now has to take a $530 million earnings hit.
"A few years ago, we relied on them far too much," Mr Goode toldThe Australian.
"The ratings agencies have been found wanting and we have been found wanting for relying on them."
ANZ chief executive Mike Smith said the approach by the agencies of rating corporate and debt products under the same structure was flawed.
"In retrospect, for debt it should have a different rating. A lot has to happen and the whole world was too reliant on these agencies," said Mr Smith.
Rating agency Standard & Poor's Australia managing director John Bailey said that domestically the 5-year default rate of locally issued corporate debt rated investment grade was just 0.6 per cent.
Mr Bailey, who refused to speak to The Australian and would only provide written answers to his own questions, admitted some confidence had been knocked out of ratings given by global agencies.
"Rating agencies have periodically been criticised for being too slow or too quick or too aggressive or too cautious," he said.
"This is inevitable when you are in the business of providing opinions about future events.
"We have seen widespread volatility in the market value of many structured securities and around 40 per cent of our ratings on US housing-related securities have been downgraded, reflecting our view of their changed creditworthiness."
The federal Government plans to toughen regulation of the agencies, which will have to report annually to the regulators to increase supervision of the sector.
But fund managers believe the system is flawed and little weighting is now given to ratings after the emergence of the financial crisis.
The agencies created conflict last week when the two majors, S&P and Moody's, downgraded Rio Tinto on debt concerns.
MME Capital managing director Tom Elliott said the market had no confidence in recent ratings: they were not considered independent.
"The funds that need the high ratings are the ones that pay their bills," he said.
Read more in The Australian.
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