IOSCO Issues Final Code of Conduct Fundamentals for Credit Rating Agencies

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Tuesday, March 24, 2015 9:32 PM / IOSCO/MR/14/2015


The International Organization of Securities Commissions (IOSCO) published today the final report on Code of Conduct Fundamentals for Credit Rating Agencies, which includes significant revisions and updates to the current IOSCO Code of Conduct for Credit Rating Agencies (IOSCO CRA Code).


The revisions to the IOSCO CRA Code are designed:

   1)    to strengthen the IOSCO CRA Code by enhancing provisions regarding protecting the integrity of the credit rating process, managing conflicts of interest, providing transparency,  and safeguarding non-public information;

   2)    to strengthen the IOSCO CRA Code by adding measures regarding governance, training, and risk management; and

   3)    to improve the clarity of the IOSCO CRA Code by adding definitions of key terms and revising existing definitions, updating terminology, restructuring existing provisions to better group them thematically, and eliminating extraneous text.


The new IOSCO CRA Code is intended to work in harmony with CRA registration and oversight programs, and to continue operating as the international standard for CRA self-governance.


The revisions result, in part, from the experience of IOSCO members in supervising CRAs. They also are informed by the work of the IOSCO Committee on Credit Rating Agencies, including the survey report describing the key risk controls established by CRAs to promote the integrity of the credit rating process and the procedures established to manage conflicts of interest. 


The IOSCO CRA Code is intended to offer a set of robust, practical measures as a guide to and a framework for CRAs with respect to protecting the integrity of the rating process, ensuring that issuers and users of credit ratings, including investors, are treated fairly, and safeguarding confidential material information provided them by issuers.


The IOSCO CRA Code was first published in 2004 when few jurisdictions had laws governing activities of CRAs. It was later revised in 2008 in the wake of the global financial crisis to include significant provisions that addressed concerns regarding the quality of information that CRAs relied on, suggestions that CRAs were too slow to review existing ratings and make downgrades as appropriate, and the possible conflict of interest arising from CRAs advising issuers on how to design structured finance products.


In February 2014, IOSCO published a Consultation Report that proposed revisions to the IOSCO CRA Code to take into account the fact that CRAs are now supervised by regional and national authorities.  


The report provides a redline comparison of the IOSCO CRA Code as proposed in the Consultation Report and as adopted in the Final Report. It also briefly explains the differences between the 2008 IOSCO CRA Code and the Final Report as well as the changes made following the public consultation.


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