An SEC release noted the new requirements will address areas like conflicts of interest, disclosure of credit rating performance statistics, standards from training/experience/competence of credit analysts and procedures to protect integrity at agencies, most notably Moody’s Investors Service, Fitch Ratings and Standard & Poor’s (S&P). The various new rules will become effective during the 2015 calendar year, some as early as January 1.
The rules are part of the ongoing implementation of the Dodd-Frank Act, passed in response to various problems (quick ending of industry bubbles, widespread risk-taking, insufficient regulatory oversight) that led to last decade’s massive recession. Congress has often scapegoated the so-called “Big Three” ratings agencies, particularly S&P (which once reduced the US’s “AAA” credit rating and publicly chided Congress for partisan gridlock while doing it), for poor performance in the run-up to the crash.
Agency officials, while noting they are still reviewing and analyzing some of the new mandates, said they will comply in full and, in theory, support the idea of a facelift/update on rules of the road governing raters.
- Brian Shappell, CBA, CICP, NACM staff writer
For a detailed information release and fact sheet released by the SEC, click here.