Dear Chairwoman Rosenworcel,
The Bank Policy Institute[1] submits this letter concerning the requirement that companies obtain a letter of credit from a bank “[t]hat has a bank safety rating issued by Weiss [Ratings] of B- or better” to participate in certain Federal Communications Commission programs.[2]
Weiss Ratings, LLC, a financial research publishing firm founded by Martin D. Weiss, does not appear to be licensed, accredited, or otherwise regulated as a recognized rating agency yet provides ratings to investors on a range of financial services companies and products, including so-called “bank safety” ratings on 4,558 banks and 4,761 credit unions.[3] In the Weiss Ratings system, a rating below B- is deemed “at risk of failure.”[4] On June 5, 2023, Weiss Ratings stated that it issued bank safety ratings of below B- to more than half of all their rated banks and credit unions.[5] As of February, 2024, approximately 58 percent of banks receiving “bank safety” ratings by Weiss Ratings had grades of below B-.[6]
As a result, utilization of Weiss Ratings would disqualify more than 2,500 banks from eligibility to issue letters of credit to FCC-regulated telecommunication providers to obtain funding from any of the affected programs. This could also affect institutions’ reputation with their customers and their prospects for other business in the future.
We have serious concerns about the reliability of Weiss Ratings and their “bank safety” ratings. As described further below, the Weiss Ratings methodology is opaque and the Weiss organization appears to lack sufficient resources to adequately assess all of the institutions it purports to rate.[7] Further, the Weiss organization regularly promotes crypto assets as an alternative to traditional banks on its official website, calling into question the organization’s impartiality and objectiveness.[8] By relying on Weiss Ratings in its regulations, the FCC effectively deputizes the organization to determine which banks may and may not provide letters of credit to carriers that participate in FCC programs. However, Weiss Ratings does not demonstrate the qualifications necessary for this responsibility.
It is troubling that an organization of such questionable background, qualifications and motivations would issue “at risk of failure” ratings to thousands of small, regional and large banks without engagement and for no clear, substantiated reason. Moreover, the FCC’s reliance on the Weiss organization could give credence to a rating system that creates potential contagion risk in the event of future banking stress.
We respectfully request that the FCC amend its rules to eliminate the Weiss Ratings requirement. Federally insured banks are subject to the highest levels of regulation and supervision that should provide sufficient protection to the FCC’s interests with respect to its program participants. This federal supervision and regulation prevent the need for an unrecognized rating agency such as Weiss Ratings, particularly in light of the limited resources and non-transparent methodology it employs and its record of regulatory infractions and conflicts. To the extent the FCC determines it must utilize a third-party rating organization, it should look to regulated nationally recognized credit rating statistical organizations.
To read the full comment letter, please click here, or click on the download button below.
[1] The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group representing the nation’s leading banks and their customers. BPI’s members include universal banks, regional banks, and major foreign banks doing business in the United States.
[2] We have identified five such programs: (i) Connect American Fund Phase II (47 C.F.R. § 54.315); (ii) Rural Digital Opportunity Fund (47 C.F.R. § 54.804); (iii) 5G Fund (47 C.F.R. § 54.1016); (iv) Uniendo a Puerto Rico Fund (47 C.F.R. § 54.1508); and (v) Connect USVI Fund Stage 2 fixed support (47 C.F.R. § 54.1508).
[3] See “Bank Ratings,” WEISS RATINGS, https://weissratings.com/en/banking (last visited Feb. 2, 2024)
[4] Martin Weiss, Still MORE Banks at Risk, WEISS RATINGS (June 5, 2023), https://weissratings.com/en/weiss-ratings- daily/still-more-banks-at-risk (last visited Feb. 2, 2024).
[5] Id.
[6] See “Bank Ratings,” supra note 3. As of February 2, 2024, Weiss Ratings stated that it issued “bank safety” ratings of C+ or below to 2,624 of the 4,558 banks it has rated.
[7] As of February 2, 2024, Weiss Ratings has 70 individuals associated with it on the employment platform LinkedIn.com. See Weiss Ratings – People, LINKEDIN.COM, https://www.linkedin.com/company/weiss-ratings/people (last visited Feb. 2, 2024). By contrast, the ratings agencies Moody’s Corporation and Standard & Poors have 13,667 and 36,946 associated individuals, respectively. See Moody’s Corporation – People, LINKEDIN.COM, https://www.linkedin.com/company/moodys-corporation/people (last visited Feb. 2, 2024); S&P Global – People, LINKEDIN.COM, https://www.linkedin.com/company/spglobal/people (last visited Feb. 2, 2024).
[8] Weiss Ratings also offers several crypto-specific services. See, e.g., New Crypto Wonders, WEISS RATINGS, https://weissratings.com/en/products/new-crypto-wonders (last visited Feb. 2, 2024) (“[F]or the opportunity to build the kind of monumental wealth that early Bitcoin investors experienced, one needs to explore a sector of the crypto world that almost no one has ever heard of. In New Crypto Wonders, your editors Juan Villaverde and Dr. Bruce Ng zoom in on this small group of unique, rare cryptos.”); Crypto Yield Hunter, WEISS RATINGS, https://weissratings.com/en/products/crypto-yield-hunter (last visited Feb. 2, 2024) (“[I]n this breakthrough service, Chris Coney shows you how to use Decentralized Finance (DeFi) technology to extract outsized crypto yields in all kinds of market conditions. One way Chris does this is through his proprietary Sideways Siphon Strategy, which he uses in his own portfolio to go for relatively consistent annual yields in the 30% to 50% range.”).
