Credit rating agencies welcome SEBI’s tighter norms

Chennai, Nov 2 (IANS) The Securities and Exchange Board of India’s (SEBI) new norms for credit rating agencies to improve their disclosures and enhanced standards in ratings is a welcome move, said credit rating agencies.

“We welcome these guidelines and believe they would lead to a material improvement in both transparency of credit rating process and enhancement of industry standards,” said CRISIL Ltd Managing Director and CEO Ashu Suyash.

“Investors will benefit immensely as the rigour and disclosures will contribute to better pricing decisions. We are committed to implementing these guidelines. In fact, many aspects of these guidelines are already a part of our existing processes,” he was quoted as saying in a statement.

“India Ratings welcomes SEBI’s guidelines on enhanced standards for credit rating agencies. The guidelines will bring in greater transparency and consistency in ratings process across the industry which will help investors to take an informed investment decision,” said India Ratings and Research CEO Rajesh Patel.

As per the new norms, the rating agencies have to mandatorily review the rated instrument on an ongoing basis throughout its lifetime with available information even in case of non-cooperation by an issuer.

“Credit rating symbol to be accompanied by ‘Issuer did not co-operate; Based on best available information’ in the same font size,” SEBI said.

According to SEBI, the press release should also be standardised in case of non-cooperation.

In respect of accountability and managing conflict of interests, the SEBI norms stipulate that obligations, responsibilities, managing conflict of interest, eligibility, composition, system of voting and other aspects. of rating committee members of Rating Committees, and roles, responsibilities and desired timelines for analysts to be set out by each rating agency in their operational manual.

As per the new norms, persons having business responsibility should not be part of the Rating Committee.

However, the MD/ CEO may be a member of the Rating Committee if the majority of the Rating Committee members are independent and there should be an annual review of the Rating Committee.

Rating agencies will now have to publish a standard set of detailed criteria documents. Further policies pertaining to the general nature of compensation and monitoring of ratings will also have to be disclosed on the website, said CRISIL.

The move will ensure investors have access to crucial information on rating riteria and its application, CRISIL added.

The rating agencies should also publish in their website the rating process and policies; any change in rating criteria, process and policies; all rating history, press releases, rating reports assigned by them including ratings withdrawn and those non-accepted by the issuer, even in case of non-public issues.

The rating transition/rating history of the issuer and details of all such ratings where the review became due but was not completed by the due date by the credit rating agencies have to be published in their websites.

The new norms are expected to an end to sudden rating suspension by issuers and also shopping for better ratings.