Importance on most ocassions is given to only the ratings by their own rating arms, and not of third parties. At times, even the rating procedure is looked at with suspicion given the pressure as a result of shrinking margins and non-performing assets. The rationale of senior bankers is that no one invests anyway in a default or a low-rated instrument. It is a high rated instrument that one invests in and all the mistakes that rating agencies have made or people have lost money in are highly-rated ones. By the time the rating agencies take notice, it is too late.
Nobody can dispense with ratings, but they do their own due diligence too.
The rating is just an input into our credit appraisal process and not the starting point. They give an overall risk profile to the portfolio because rating agencies have an overall track record. Yes, we have a problem when there is a contrarian view and our opinion and the rating agency's opinion differs. Then, we prefer to rely on our own assessment. In a developed market, where the recovery mechanism is stronger and recovery is faster, scope exists to invest in lower-rated securities but with higher returns.