The Australian Securities and Investments Commission (ASIC) has detailed what it expects to be in credit ratings agencies’ compliance reports.

The report, which must be lodged annually with ASIC, will require the agencies to detail their procedures, methodologies and assumptions so an outside party can understand how the rating was achieved.

The agency must also inform ASIC if there is any changes to these procedures as well as dealing with conflicts of interests.

How the agency is paid for a rating must also be explained together with historic default rates of categories and if they have changed over a period of time.

ASIC Chairman Greg Medcraft says the proposals are aimed at requiring agencies to detail how they have met their licence conditions.

“ASIC sees establishing reporting standards, together with setting Australian financial services licence conditions and ongoing industry-wide surveillance, as its core regulatory tools in supervising agencies,” he said.

“Reporting by agencies helps give ASIC, and therefore the broader market, insight into their operations and as such, some degree of reassurance to investors in the integrity of issued credit ratings.”

Meanwhile, credit ratings agencies have until July 13 to submit comments on the compliance proposals.