Iosco calls for international co-ordination on rating agency reform

Enhanced international monitoring and co-operation over credit rating agencies needed says Iosco

MADRID – The International Organisation of Securities Commissions (Iosco) has called for greater international co-ordination in the oversight of credit rating agencies. The call comes after the US Securities and Exchange Commission introduced new rules for credit rating agencies and the European Union drafted a directive for rating agency regulation. European regulators have so far dismissed Iosco’s attempts at industry self-regulation.

The industry body’s technical committee has completed its assessment of methods for checking compliance with Iosco’s voluntary code of conduct released in May 2008. Iosco identifies four measures to improve international monitoring of the credit ratings process, which has been the subject of ongoing controversy since ratings of subprime structured credit became volatile last year, exposing the shortcomings and conflicts of interest within the industry.

The first recommendation is for a global consistency in regulation. The second is for Iosco’s Task Force on Credit Rating Agencies (TFCRA) to explore monitoring solutions while legislative measures continue. The third is for the TFCRA to review the rating agencies’ compliance with the code of conduct, reporting back in January 2009. Lastly, the fourth is for the TFCRA to explore the possibilities of developing an international monitoring body for the industry to satisfy the demands of regulators in response to market events.