SEBI’s Enhanced Standards for Credit Rating Agencies

On November 1, 2016, the Securities and
Exchange Board of India issued a circular containing Enhanced
Standards for Credit Rating Agencies
. These seek to introduce greater
stringency in the operation of the rating industry. The areas covered include:
– Formulation of Rating
Criteria and rating processes and public disclosure of the same.
– Accountability of
Rating Analysts.
– Standardisation of
Press Release for rating actions.
– Functioning and
evaluation of Rating Committees/Sub-Committees.
– Disclosure of
ratings in case of non-acceptance by an issuer.
– Disclosure in
case of delay in periodic review of ratings.
– Policy in respect
of non-co-operation by the issuer.
– Strengthening and
enhancing the relevance of Internal Audit of CRAs, viz. appointment and rotation
of auditors and scope of the audit.
The credit rating agencies are
required to implement these enhanced standards within 60 days from the date of
the circular.
Although these changes have imposed
onerous requirements on rating agencies, some believe they
do not go far enough
.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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