In an apparent response to criticism that the three credit rating agencies were slow to downgrade bad actors like Enron Corp. and WorldCom Inc., the Securities and Exchange Commission admitted a fourth company to the exclusive group it regards as qualified to provide corporate bond ratings. The point? To inject a little competition to get debt analysts on their toes about spotting trouble. A noble mission, but how much of a threat does the new entrant, Canada's Dominion Bond Rating Service Ltd., really pose? In the short run, not very much; any potential will take some time to develop.

Established in 1976, Dominion plays a prominent role in Canada's debt market, just as market leaders Moody's Investors Service and Standard & Poor's Corp. do in the U.S. However, Dominion is much smaller than the major U.S. rating agencies. As a private company, it does not report its revenues, but Dominion has 65 employees. By contrast, Fitch Ratings, the third, smallerU.S. player, says it has more than 1,200, while Moody's has more than 1,700 and S&P more than 5,000.

Observers say that the disparity in size initially will limit the extent to which Dominion can take on the established market brands of Moody's and S&P. "David and Goliath looked good in the Bible. It doesn't always work in finance," says Glenn Reynolds, CEO of CreditSights, a company that provides credit research and strategy. Kent Baker, a finance professor at American University's Kogod School of Business, compares the ties between bond issuers and the rating agencies with those between corporations and their auditors. While relationships, post Enron, with both auditors and agencies have been under stress, many companies are sticking with what they know. Clearly, there "has to be a fairly strong reason for someone to change," Baker notes.

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