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:
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.
Criteria and rating processes and public disclosure of the same.
– Accountability of
Rating Analysts.
Rating Analysts.
– Standardisation of
Press Release for rating actions.
Press Release for rating actions.
– Functioning and
evaluation of Rating Committees/Sub-Committees.
evaluation of Rating Committees/Sub-Committees.
– Disclosure of
ratings in case of non-acceptance by an issuer.
ratings in case of non-acceptance by an issuer.
– Disclosure in
case of delay in periodic review of ratings.
case of delay in periodic review of ratings.
– Policy in respect
of non-co-operation by the issuer.
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.
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.
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.
onerous requirements on rating agencies, some believe they
do not go far enough.
