[DEBATE] : S&P unveils ratings overhaul
Riaz K Tayob
riazt at iafrica.com
Thu Feb 7 09:29:50 GMT 2008
S&P unveils ratings overhaul By Gilian Tett and Jennifer Hughes in
London and Aline Van Duyn in New York Published: February 7 2008 00:01 |
Last updated: February 7 2008 00:01
Standard & Poor?s will on Thursday unveil a wave of business reforms in
an effort to quell mounting regulatory pressure and investor anger about
the failure of credit ratings agencies to foresee subprime housing losses.
The agency will pledge to overhaul the way it measures the riskiness of
securities, step up investor education and reduce potential conflicts of
interest by taking steps such as rotating analysts aroundbeats.
The move comes as the other two leading rating agencies ? Moody?s and
Fitch ? overhaul their procedures in the wake of the credit turmoil,
which has forced the three agencies to downgrade tens of thousands of
securities in recent weeks.
These downgrades have come as a shock for investors, since many involve
securities that previously carried the top-notch, ultra-safe ?triple A?
tag. This, in turn, is now fuelling political pressure for American and
European regulators to tighten oversight of the agencies, which are only
subject to light regulation.
?Rating agencies are like the gatekeepers of the capital markets . . .
so it is very important that we do a thorough examination now, and see
if there is an appropriate regulatory response [to these issues] ? I
suspect there may be,? Mary Schapiro, head of the Financial Industry
Regulatory Authority in New York told the Financial Times on Wednesday.
The International Organisation of Securities Commissioners, a group of
global regulators, is debating whether more regulation is needed. On
Wednesday it issued a preliminary paper calling on the ratings agencies
to improve their procedures.
However, it refrained from demanding formal controls amid signs that
regulators remain divided over this issue. ?There?s still hesitation
within some regulators to [introduce] formal regulation,? said Michel
Prada, France?s top regulator who co-chairs the IOSCO committee.
However, Charlie McCreevy, European Union financial services
commissioner, on Wednesday warned that he would push for regulation of
the industry within a matter of months if they did not overhaul their
operations in a radical manner. ?There is more to be done,? he said.
Deven Sharma, S&P president, refused to comment on whether the industry
would be able to avoid more regulation. However, he insisted that S&P
was determined to raise investor confidence by reforming its practices.
Copyright The Financial Times Limited 2008
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