CESR published the non-confidential responses received to the questionnaire regarding the rating of structured finance instruments and is providing for an additional extension of the deadline until 10 September. In addition, CESR has already scheduled a meeting with the CRAs that will take place at the beginning of October to discuss in general any issues related to implementation of the IOSCO Code and, more specifically, to obtain first hand information from the CRAs on how they develop ratings for structured finance products.
In the last year report CESR identified a possible conflict of interest as an area of common deviation to all CRAs, due to the lack of a clear separation between the rating service and the ancillary services provided by the CRAs.
This part of the report will provide a discussion of the rating process as regard structured finance instruments, including an analysis of the CRAs’ actual responses to prevailing market developments (like the current concerns associated with the sub-prime mortgage market).
It is CESR’s intention to seek clarification during the meeting on the CRAs’ role in the US sub-prime mortgage crisis.
In the near future CESR will also be meeting with Commissioner McCreevy to discuss the role of CRAs as regards the rating of structure finance instruments.
Finally, in light of future market events, CESR will also assess whether it would be convenient to organise a hearing to give market participants the opportunity to further express their views in relation to the rating of structured finance instruments and the role CRAs are performing in this sector.
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© Graham Bishop
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