IF CREDIT-RATING agencies evaluated themselves in secret, they might well be upgrading their own outlooks. For much of the past year they were numbered among those most vulnerable to punishment for their role in the credit crisis, largely thanks to the generous ratings they doled out on dubious mortgage-linked securities. The agencies’ profits have been hit. Both Standard & Poor’s (S&P), owned by McGraw-Hill, and Moody’s have reported steep declines in first-quarter earnings, as demand for rating such instruments has tumbled along with new issues. And there are still ugly loose ends: last month Moody’s jettisoned its chief operating officer and faced potentially explosive allegations that some ratings may have been inflated by errors in its computer models. Nevertheless the shares of their parent companies have been fairly resilient this year, reflecting how muted the regulatory backlash has been.

That is not because of a shortage of scrutiny. At least six government or global industry bodies have been examining the rating agencies’ role in the crisis. As The Economist went to press, S&P, Moody’s and Fitch, the big three agencies, seemed on the verge of striking an agreement with Andrew Cuomo, the New York State attorney-general, who has been investigating their role in the mortgage market. Any deal would probably seek to prevent “ratings shopping”, in which new issuers play off rating agencies against each other in order to elicit the most generous credit rating. And it would probably force agencies to disclose more about the underlying collateral of the instruments they rate, in theory helping investors to reach their own judgments. This would complement a revised code of conduct drawn up by the International Organisation of Securities Commissions (IOSCO), a body of regulators. It wants agencies to scrutinise their own models and to improve transparency by, for example, ensuring that ratings of structured products are differently labelled from those of less volatile bonds.

For the agencies, which had already revised their business methods earlier this year, this is a far cry from the apocalyptic predictions of crippling fines and suffocating regulation. They will remain on edge until the Securities and Exchange Commission (SEC), with which agencies have had to register since last year, issues its own report this month. Still, until now the SEC’s position has been to promote more competition in the industry, rather than act as a heavy-handed supervisor. Assuming its stance does not deviate much from IOSCO’s, the two big underlying problems with credit ratings may be left untackled.

First, the agencies had an incentive to be lenient because debt issuers, rather than investors, pay for credit ratings. Second, many investors placed blind faith in these ratings, without conducting enough checks of their own.

The agencies will remain exposed to conflicts of interest, because their customers will remain the issuers. And with credit ratings enshrined in investment-fund mandates and bank capital-adequacy rules, some investors may continue to treat them as semi-official judgments. The agencies, against the odds, look in better shape than many of the instruments they once rated so generously.