Shares of rating agency Moody's Corp. were down 13 per cent, the most in nine years since it became an independent entity, on Wednesday morning in the wake of a Financial Times report alleging a computer coding error boosted the investment ratings of a particular class of debt instrument and wasn't immediately corrected after it was uncovered.

Some senior staff at Moody's Investors Service were aware in early 2007 that constant proportion debt obligations (CPDOs), funds that used borrowed money to bet on credit-default swaps, should have been ranked as much as four levels lower, the paper said, citing internal Moody's documents. Instead, they had been assigned Triple-A or ''AAA'' ratings. Which remained until January 2008, when market turmoil led to hefty downgrades.

These allegations couldn't have come at a worse time. They will raise additional questions about internal controls at credit ratings firms even as they face scrutiny from lawmakers and regulators for assigning their top grades to securities derived from loans to people with poor credit.

Ratings agencies such as Moody's, Standard & Poor's and Fitch have come under fire during the credit storm after triple-A rated debt instruments that contained sub-prime mortgages and other risky debt collapsed, further precipitating the crisis.

The crisis caused banks including UBS AG and ABN Amro Holding NV to unwind their CPDOs, triggering losses of as much as 90 per cent for investors. Total losses from deteriorating sub-prime mortgage and repackaged debt are estimated to have crossed $400 billion.

US Senate Banking Committee Chairman Christopher Dodd has flagged the potential conflict of interest between ratings firms and the issuers that pay their fees, while the Securities and Exchange Commission is probing the way ratings are assigned.

The company said it was examining its ratings policies in European CPDOs in response to the FT story. "Moody's regularly changes its analytical models and enhances its methodologies for a variety of reasons, including to reflect changing credit conditions and outlooks," it said.

''In addition, Moody's has adjusted its analytical models on the infrequent occasions that errors have been detected…. However, it would be inconsistent with Moody's analytical standards and company policies to change methodologies in an effort to mask errors. The integrity of our ratings and rating methodologies is extremely important to us, and we take seriously the questions raised about European CPDOs."

Moody's shares fell over 13 percent to $37.95 in the largest one-day drop in the stock since it was spun off from Dun & Bradstreet in 2000. Billionaire investor Warren Buffett's Berkshire Hathaway Inc. is the largest shareholder in the credit ratings company with a 19.6 per cent stake. Similarly, shares of McGraw-Hill, Standard & Poor's parent company, were down more than 5 per cent.