Quebec Premier Jean Charest calls on applauding members to settle down during the Liberal government caucus meeting on Thursday in Lévis, Que. (Jacques Boissinot/Canadian Press) Pressure is mounting for Quebec Premier Jean Charest to testify under oath about historic revenue losses at the province's pension fund manager, the Caisse de dépôt et placement du Québec.

The Opposition Parti Québécois has intensified calls for the premier to testify after the bond rating agency Standard and Poor's put the Caisse on credit watch, citing "increasing instability" in top management.

PQ leader Pauline Marois said the Liberal government failed to name new board members quickly enough to satisfy the financial watchdog.

The contracts for most members of the board have expired, and the Caisse has had three different CEOs in the past 12 months.

As the premier accused the PQ of further destabilizing the situation by politicizing the debate, Marois accused Charest of the same.

"Mr. Charest is creating insecurity because he refuses to appear before the legislative committee hearing," said Marois.

S&P reconsiders credit rating

On Thursday, S&P placed the pension fund manager's AAA credit rating under review.

'Based on our current information, it is likely we will either affirm the AAA and assign a negative outlook, or lower the long-term ratings by one notch.'—Nikola Swann, S&P credit analyst

The rating will remain on credit watch with negative implications for the next three months.

This week, the pension fund manager reported a $39.8-billion loss for 2008, a loss of one-quarter of the total assets which now sit at $120.1 billion.

S&P officials said the review was prompted by both the losses and the instability within the Caisse's management team.

"We expect there may be debate within Quebec political circles on the possibility of more fundamental changes in the Caisse's relationship with the Quebec government, potentially reducing the independence with which it makes its investment decisions," wrote S&P credit analyst Nikola Swann in a statement.

At the end of the three-month review, S&P will likely do one of two things.

"Based on our current information, it is likely we will either affirm the AAA and assign a negative outlook, or lower the long-term ratings by one notch," she wrote in the statement.

She added that the rating service continues to believe in the Caisse 's ability to meet its financial obligations.

In its own statement of response, the Caisse pointed out that its rating is still the highest in Canada. Officials promised to answer all questions raised by the rating service as part of the review.

Liberals point fingers back at PQ

At the end of a Liberal caucus meeting Friday in Lévis, Charest blamed the PQ for the S&P decision.

By insisting the government was involved in the risky decisions taken by fund managers, Charest said the PQ has politicized the problem.

Charest said Caisse managers made decisions about how much risk to take, not him.

"Standard & Poor's sends a very direct message that they are concerned about the overpoliticization of the Caisse, in the negative sense of the word, because of what they're witnessing in the political debate in Quebec. It's a very direct message to the Parti Québécois," said Charest.

Charest said there is no need for him to testify at the committee because he is perfectly willing to answer questions from the news media.

Parizeau weighs in on next steps

One of the people who helped create Quebec's pension fund manager more than 40 years ago is calling for a full public inquiry into the Caisse affair.

Former Quebec premier Jacques Parizeau helped create the Caisse. (CBC) In an interview with Radio-Canada, former premier Jacques Parizeau accused the Charest government of being aware of the problems at the Caisse before last year's election but refusing to take action.

Parizeau also criticized the Caisse for its investing and borrowing practices over the past few years which he said lead directly to the massive losses announced this week.

The former premier says if the upcoming parliamentary commission does not get to the bottom of the situation, then the government needs to hold a public inquiry instead.

The pension fund manager holds one of Canada's largest pools of investment capital and is a major investor in real estate, blue-chip Canadian companies and well-known Quebec firms such as Quebecor Media.

Its clients are mostly Quebec public and private pension and insurance plans.