Tougher Industry Code for Credit Rating Firms
At a meeting in Paris this week, the International Organisation of Securities Commissions (IOSCO) stated that credit rating agencies will be banned from helping to design products they also grade. This is part of an effort to implement and enforce a tougher industry code of conduct to tackle issues raised by the U.S. subprime mortgage crisis such as conflicts of interest.
The credit agencies include Standard & Poor's, a unit of McGraw Hill, Moody's, and Fitch, part of Fimalac.
IOSCO drew up in 2003 a code of conduct for the ratings industry to apply, and at the meeting beefed up the code in light of lessons from the global credit squeeze.
"I believe that these changes to the code of conduct will help to address a number of issues that have arisen as a result of the current credit crisis regarding how the credit ratings for structured finance products are developed by credit rating agencies and relied upon by issuers and investors," said Michel Prada, chairman of IOSCO's technical committee.
Published on May 28, 2008
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