30 July 2013

IOSCO publishes recommendations for Supervisory Colleges for CRAs

IOSCO published the final report on Supervisory Colleges for Credit Rating Agencies, which recommends establishing supervisory colleges for internationally active CRAs, and provides preliminary guidelines on how to constitute and operate them.

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. G20 leaders are also concerned with the integrity of CRAs and have repeatedly encouraged IOSCO to work to improve their effectiveness.

The dispersion of internationally active CRA affiliates worldwide poses a challenge to supervisors, as their perspective may be limited to the CRA 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.

IOSCO defines a supervisory college as a collaborative arrangement between supervisors that seek to promote information sharing, consultation, and cooperation in order to enhance risk assessment of internationally active CRAs and to support effective supervision of such CRAs.

The type of information that might be discussed or shared, where appropriate, could include inspection or examination of findings with respect to the following:

• CRA's compliance with local or regional laws and regulations
• The CRA's implementation and adherence to the IOSCO Code of Conduct for CRAs
• The establishment and operation of rating models and methodologies, internal controls, procedures to manage conflicts of interest, and procedures for handling material non-public information.

The role of the CRA college would be to create a mechanism for sharing and discussing this type of information with the goal of promoting a better understanding of the risks faced or posed by an internationally active CRA and how relevant supervisors are addressing these risks. Where desired by members, a CRA college may facilitate consensus recommendations on how to address key risks faced or posed by the CRA through heightened supervision and/or targeted examination and inspection activities, consistent with national laws.

Full report

© IOSCO