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In a move that’s likely to appeal equally to sado-masochists and anyone with an inkling that ratings agencies have something to do with the credit crunch, Moody’s has promised to ‘discipline’ its staff (The Times), and sacrificed its head of structured finance. Coding errors caused the crackdown (Financial Times), but there’s more to this than a transitory crack of the whip.

As the structured credit market has plummeted, so has ratings agencies’ need for an army of people to rate structured products. “Six to nine months ago, structured credit teams at the larger agencies had 20 or more people in London,” says David Butter at risk recruitment firm GRS. “Now they’ve got one or two.”

Fitch has promised to eliminate 8-10% of its staff by September 2008. S&P is extracting 246 people according to a recent release by parent company McGraw Hill. Canadian agency DBRS ejected 43 people in Europe when it closed its European offices in January. Most of the cuts have hit structured credit teams.

It’s a crying shame, according to Butter, who says they were populated by high-calibre types who’d been prised out of investment banks. They were also earning good money – anything from £55k-£300k.

Some refugees have found shelter in banks – take Saul Greenberg, a former managing director at DBRS, who’s allegedly returned to Deutsche. But plenty are doing nothing.

There may yet be opportunities for some to inveigle their way back in: Butter says agencies are talking about upgrading staff in an effort to rebuild their reputations. The group MD of one agency says they’re still hiring in hot areas like financial institutions.

And once the storm has passed, Chris Whalen, managing director of consultancy Institutional Risk Analytics, says agencies may even need more bodies: “If you’re rating products in the primary markets, you’re going to need to follow things a lot more closely than has happened in the past. The big question is who will pay for it.”