Global securities regulators have published their recommendations for establishing cross-border supervisory arrangements for internationally-active credit rating agencies (CRAs).
The International Organization of Securities Commissions (IOSCO) published a final report Tuesday that recommends establishing supervisory colleges for the global CRAs — collaborative arrangements between regulators to promote information sharing, consultation, and cooperation in order to enhance risk assessments, and to support effective supervision, of these firms.
The report also provides preliminary guidelines on how to build and operate these colleges. “The recommendations are aimed at improving the integrity of CRAs, as part of IOSCO’s effort to enhance investor protection and the fairness, efficiency and transparency of securities markets,” it says.
IOSCO says that the dispersion of rating agency affiliates around the world poses a challenge to regulators, “as their perspective may be limited to [their] activities in their jurisdiction.”
“The creation of a CRA college could ultimately enhance the effectiveness of supervisors’ risk assessment and oversight of internationally active CRAs by facilitating information exchange and cooperation among them,” it notes, adding that this could provide a better understanding of the risks faced by an internationally active CRA, or risks posed by these firms; and how regulators are addressing these risks. They could also help generate consensus recommendations on how to address these risks through heightened supervision and/or targeted examinations.