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The fifth AMF annual report on CRAs focuses on the impact of credit ratings on the terms and conditions of corporate financing and on the ratings of structured finance products
“Before the onset of the crisis, the AMF had been pushing for changes in rating-agency supervision and had put forward proposals to that effect” AMF Chairman Jean-Pierre Jouyet said. “The model is now changing, so we must be alert to ensure that the system which ultimately emerges can underwrite the quality, transparency and integrity of the credit analysis process”
The AMF calls for an effective EU-wide supervisory framework that must be conducted in a co-ordinated manner within CESR, Jouyet continued with a view to the currently discussed EU-regulation. Also, the AMF proposes to facilitate the emergence of alternative models of credit analysis, to supplement the CRAs' current system.
In view of the potentially destabilising effects of rating downgrades, the AMF urges market participants to proceed with the utmost caution when linking corporate funding conditions to a credit rating. This is particularly the case when loan or issuance covenants contain trigger clauses.
The AMF reaffirms the need for CRAs to be more transparent with regard to their individual ratings and the methodological elements and specific assessments that deliver these results, to the statistical data they use, and to the component assets of structured products. This would allow investors to better measure and manage the risks associated with these products.