SEC issues warning to ratings firms

Regulator to push for more transparency of CRA ratings methodology

WASHINGTON, DC – The US Securities and Exchange Commission (SEC) is putting pressure on credit rating agencies (CRAs) such as Moody's, Standard & Poor's and Fitch, over their valuations of complex financial products. According to sources contacted by Bloomberg, the SEC might recommend that the firms be barred from advising banks on how to attain AAA ratings on asset-backed securities in a meeting to be held in Washington, DC on Wednesday June 11.

In a bid to improve transparency, the agency is also expected to propose that CRAs should be legally obliged to publish all the criteria concerning each individual rating.

This is the latest in a series of suggested reforms for the rating agencies following concerns that their triple-A rating of certain securities related to subprime assets exacerbated the crisis and contributed to the multi-billion dollar writedowns suffered by many global banks.