Australia is watching the progress of new legislation before the US Congress which is aimed at tightening control over credit ratings agencies and reducing business reliance on them.

A spokesman for Financial Services Minister Chris Bowen told insuranceNEWS.com.au the Federal Government is actively monitoring regulatory developments in the US and elsewhere to ensure local oversight of the agencies is internationally consistent.

With inaccurate investment ratings being blamed for fuelling the global financial crisis, ratings agencies are being scrutinised more intensely than ever before.

The US draft bill contains new rules on disclosure and conflicts of interest, but has been criticised for not making ratings agencies more open to legal actions.

But the US Treasury says it is aiming to reduce dependence on ratings. The draft bill would ban agencies from providing consultancy services to companies they rate and require them to disclose fees they are paid. They also discourage companies from “shopping” for the highest rating.    

In Australia, the July 1 deadline for licensing of the “big three” – Standard & Poor’s, Moody’s Investors Service and Fitch Ratings – has been extended six months by the Government, pending overseas developments.

Europe is also working on a stricter regime for the ratings agencies.