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The objective of the consultation report is to clarify information provided by respondents to two survey questionnaires on Other CRA Products that IOSCO published on its website in 2015. The report also asks respondents to comment on IOSCO’s current understanding of these CRA products and services and how they differ from the traditional issuer-paid or subscriber-paid credit ratings.
Other CRA Products are certain non-traditional, credit-related products and services. They are important because market participants may use them to make investment and other credit-related decisions. Issuers and obligors may also use these products to make decisions about whether to obtain a credit rating from a particular CRA.
Examples of Other CRA Products and services include, inter alia: private ratings, confidential ratings, expected ratings, indicative ratings, prospective ratings, provisional ratings, preliminary ratings, credit default swap spreads, bond indices, portfolio assessment tools, and other tools.
To gain a better understanding of Other CRA Products, IOSCO consulted market participants through the questionnaires and organized multiple panel discussions with CRAs, users of Other CRA Products and other market participants. The goal of the first questionnaire was to determine the difference between traditional credit ratings and other credit-related products. The second questionnaire was aimed at learning how issuers, investors and others utilize and understand Other CRA Products. After reviewing the responses to the questionnaires and conducting additional consultation, IOSCO made three main observations:
· Some Other CRA Products share some common processes and features with traditional credit ratings. For example, CRAs develop a number of Other CRA Products using the same credit rating analysts who determine traditional credit ratings;
· CRAs tend to create separate structures or business line organizations to offer Other CRA Products;
· Other CRA Products can be categorized in six primary groups, which are described and analyzed in chapter five of the consultation report.
IOSCO’s specific questions for comment in the consultation report are primarily directed at CRAs, but users of Other CRA Products and other interested persons are also invited to respond, specifically:
· Are there additional Other CRA Products that you can identify?
· Are there other features of the six Other CRA Product groups that you believe should be added to the consultation report?
· Are there additional uses of the Other CRA Products that you can identify in addition to what is described in the consultation report?
· With respect to each of the six Other CRA Product groups identified in the consultation report, do you consider the Other CRA Product group to be covered by the Code of Conduct and the IOSCO CRA Principles? Please explain.
· Do you apply the Code of Conduct and the Principles to the Other CRA Products? Please explain.
Public comments should be submitted by December 5, 2016.