IOSCO Urges Greater International Coordination In The Oversight Of Credit Rating Agencies

The International Organization of Securities Commissions (IOSCO) Technical Committee has completed its assessment of methods for checking compliance with the Code of Conduct Fundamentals for Credit Rating Agencies (IOSCO Code of Conduct). IOSCO has identified 4 measures which it believes will contribute to improved international monitoring of credit rating agencies (CRA) and serve to address the issues that have contributed to the failures in the structured finance products market:

• IOSCO favours a consistent global regulatory approach to monitoring the activities of CRAs. It urges legislators to consider the regulatory consensus represented by the IOSCO Code of Conduct when framing legislation as any fragmentation runs the risk of a reoccurrence of problems with product ratings;
• While global legislative efforts run their course, IOSCO’s Task Force on Credit Rating Agencies (TFCRA) will work towards developing mechanisms by which national regulators can coordinate their monitoring of CRAs with the substance of the IOSCO Code of Conduct. The TFCRA will explore a common monitoring module and set the terms and conditions of information exchange and cooperation by January 2009;
• The TFCRA will also conduct a review of CRAs adoption of codes of conduct based on the revised IOSCO Code of Conduct and will publish its findings in January 2009; and
• Events in the last 12 months have clearly shown the need for greater interaction between CRAs and regulators and the TFCRA will examine the possibility of developing an international monitoring body to discuss issues with CRAs and to advance the expectations of the international regulatory community. It is envisaged the body would be similar in structure and purpose to the auditing standards oversight body, the Public Interest Oversight Board.

The next meetings of IOSCO’s Technical and Executive Committees will take place in January 2009.