Regulators turn screws on ratings agencies
Regulators have moved to improve controls on credit ratings agencies in the wake of the global credit crunch, which claimed many A-rated securities.
The International Organisation of Securities Commissions (IOSCO) last week announced a beefed-up code of conduct for agencies.
Standard & Poor’s Australia MD Chris Dalton welcomes the move from IOSCO, which comprises over 100 industry watchdogs including ASIC.
“We strongly support the IOSCO code of conduct,” Mr Dalton told insuranceNEWS.com.au. “Many of the additions are already incorporated in our current procedures, and others have been addressed in new actions to strengthen ratings and transparency.”
Agencies have come under scrutiny in recent months for the way in which ratings are developed and used by issuers and investors.
Critics claim a conflict of interest exists because agencies earn revenue from the companies whose products they rate.
IOSCO’s new rules prevent agencies from having input into the design of financial products they rate, while agencies must disclose all clients which contribute over 10% of total revenue.
IOSCO also calls for more robust review and disclosure standards, including comparative agency performance benchmarks.
The association claims the measures will help “protect the integrity of the ratings process, [and] ensure that investors and issuers are treated fairly”.
Corporate Law Minister Senator Nick Sherry last month announced a six-month review of local ratings agencies.
ASIC spokesman Angela Friend told insuranceNEWS.com.au Treasury and ASIC are “likely to consider the amended code and its applicability to the Australian situation as part of that review”.
The International Organisation of Securities Commissions (IOSCO) last week announced a beefed-up code of conduct for agencies.
Standard & Poor’s Australia MD Chris Dalton welcomes the move from IOSCO, which comprises over 100 industry watchdogs including ASIC.
“We strongly support the IOSCO code of conduct,” Mr Dalton told insuranceNEWS.com.au. “Many of the additions are already incorporated in our current procedures, and others have been addressed in new actions to strengthen ratings and transparency.”
Agencies have come under scrutiny in recent months for the way in which ratings are developed and used by issuers and investors.
Critics claim a conflict of interest exists because agencies earn revenue from the companies whose products they rate.
IOSCO’s new rules prevent agencies from having input into the design of financial products they rate, while agencies must disclose all clients which contribute over 10% of total revenue.
IOSCO also calls for more robust review and disclosure standards, including comparative agency performance benchmarks.
The association claims the measures will help “protect the integrity of the ratings process, [and] ensure that investors and issuers are treated fairly”.
Corporate Law Minister Senator Nick Sherry last month announced a six-month review of local ratings agencies.
ASIC spokesman Angela Friend told insuranceNEWS.com.au Treasury and ASIC are “likely to consider the amended code and its applicability to the Australian situation as part of that review”.