TagCredit Rating

A Critique of SEBI’s Proposed Amendment to the Credit Rating Regulatory Framework

[Rongeet Poddar is a final year B.A. LLB (Hons.) student at the West Bengal National University of Juridical Sciences] The objective of credit rating agencies (CRAs) is to reduce information asymmetry by facilitating investors to form an informed opinion on the credit-worthiness of a debt instrument. The Report of the Committee on Comprehensive Regulation for Credit Rating Agencies released by...

Crossholding in Credit Rating Agencies: An Insight into the SEBI Consultation Paper

[Kashish Jain is a 4th year B.B.A L.L.B (Hons.) student at Jindal Global Law School in Sonipat, Haryana] A credit rating agency (CRA) is a service provider that assesses the creditworthiness of an entity (issuer) or a debt instrument (e.g., asset-backed securities). Typically, it expresses an opinion that is based on processing information and conducting research. CRAs seek to reduce the...

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. –...

Unenforceable Agreements and Credit Rating Agencies

A striking feature of the credit market over the past decade or more is the growing importance of credit rating: its significance for an applicant in urgent need of credit for his business cannot be overstated. This has given rise to some difficult legal problems: an obvious one is the liability of a credit rating agency (‘CRA’) for negligent entries. Another is whether a CRA is entitled to take...

Australian Court on Rating Complex Financial Instruments

The Federal Court of Australia has delivered an important ruling that pertains to the liability of credit rating agencies. In Bathurst Regional Council v. Local Government Financial Services Pty Ltd, the court found that Standard & Poors (S&P) was liable to several local councils in Australia for a AAA rating provided in connection with their investment in complex financial instruments...

Rating Agencies Back in the Spotlight

S&P has indeed made a bold move by downgrading United States’ sovereign rating. While there may by political opposition, quibbles with the arithmetic, and the like, there is a strong view that those amount to “shooting the messenger”. The downgrading by S&P assumes greater importance because it comes in the wake of determined efforts by governments to tighten their control over credit...

NALSAR Student Law Review: New Issue

The latest issue of the NALSAR Student Law Review (which is available online) carries a number of articles that may be relevant to readers of this Blog. Here is a list of those: – Regulation and Responsibility of Credit Rating Agencies vis-a-vis the Current Economic Crisis- A Comparative Analysis – Rethinking the Linkages Between Foreign Direct Investment and Development: A Third...

Bits of Interest

1.         Regulation of Credit Rating Agencies Drawing lessons from the role of credit rating agencies (CRAs) in the recent financial crisis, SEBI has imposed additional transparency and disclosure norms for the Indian CRAs. SEBI’s circular issued on May 3, 2010 covers issues such as maintenance of records of the rating process, dealing with conflicts of...

Regulating Credit Rating Agencies

The RBI recently put out two documents, (i) the Report of the Committee on Comprehensive Regulation of Credit Rating Agencies prepared “in response to the direction given by the High Level Coordination Committee on Financial Markets to reflect on the inter regulatory issues emanating from the activities of Credit Rating Agencies”, and (ii) the Assessment of Long Term Performance of Credit Rating...

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