|
|
IOSCO published for consultation its report on the role of credit rating agencies in structured finance markets. The report discusses the role of CRAs in the recent credit crisis and proposes ways to strengthen processes and procedures at CRAs.
In particular, the report proposes expanding upon the Code of Conduct provisions relating to the quality and integrity of the rating process. Key proposals require that CRAs refrain from rating a product if the complexity or structure of a new type of rating creates doubts about the feasibility of a rating action, and prohibit analysts from making proposals or recommendations regarding the design of structured finance products that the CRA rates.
To ensure independence and avoidance of conflicts of interest, CRAs should disclose among others whether any one client and its affiliates make up more than 10 percent of it’s annual revenue, and define what it considers and does not consider to be an ancillary business and why.
The report also recommends enhancing disclosure requirements to the investing public and issuers, including disclosing the methodology or methodology version in use in determining a rating.
Deadline for comments is