US SEC mulls ways to rely less on credit ratings
At a Congressional hearing, Schapiro said her agency was looking at creating a ‘roadmap’ to lessen the SEC’s reliance on credit ratings.
She also said liability could improve the quality of credit ratings. “It may make a big difference. You would want to be careful in crafting it. You want rating agencies to work,” Schapiro told House Financial Services Capital Markets Subcommittee.
Federal securities laws are intertwined with the credit rating agencies and makes references to the ratings in dozens of its rules.
The SEC has already proposed removing references to credit ratings in most of its rules, but that idea is strongly opposed by Wall Street.
Credit rating agencies, such as McGraw-Hill Cos Inc’s Standard & Poor’s and Moody’s, are now being targeted by a squad of SEC examiners.
And Schapiro has directed SEC staff to consider new rules to prevent companies from shopping around for favorable ratings.
SEC staff are exploring requiring banks and other bond issuers to disclose the preliminary ratings obtained from credit rating agencies before they selected the credit agency to publicly rate their product, she said.
The SEC is also mulling requiring credit agencies to privately disclose the underlying data of structured products so that other rating agencies could provide an unsolicited rating on the product.
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)