More US action on CRAs

There has been a lot of talk about increasing regulatory supervision of the credit ratings agencies since the onset of the global financial crisis, but now momentum seems to be steadily building for changes to actually be made. The latest suggestions have come from the Securities and Exchange Commission and include a requirement for banks selling structured finance securities to reveal all ratings received while shopping for a rating to be assigned to the securities.

This would seem an easy requirement to avoid - CRAs will simply not give an opinion until a rating has actually been assigned, after due process. The proposal for CRAs to disclose revenues from their largest clients would seem to be more useful.

And reminiscent of ASIC's ideas, discussed here last week, the SEC has suggested that rating analysts authorise the use of their opinions in the securities sales process. If the SEC is seeking to attach individual liability to the analysts, it won't work.

Individual analysts do not have opinions; the published opinions are the collective view of the CRA, determined through the strict use of rating committees to assign and review ratings.