SEC Staff Recommends SEC Take No Action in Report on Credit Rating Standardization
In this report, the SEC staff announces the recommendation that the Commission not take any further action at this time with respect to:
- standardizing credit rating terminology;
- standardizing the market stress conditions under which credit ratings are evaluated;
- requiring a quantitative correspondence between credit ratings and a range of default probabilities and loss expectations under standardized conditions of economic stress; and
- standardizing credit rating terminology across asset classes.
SEC staff further asserts that it would be more efficient to focus on the rulemaking initiatives mandated under the Dodd-Frank Act, which they note were intended to promote transparency with respect to the performance of credit ratings and the methodologies used to determine credit ratings.
Cross-Reference(s): Dodd-Frank Section 939(h).
Lofchie Comment: The report provides some mildly interesting information on ratings and the ratings process. That said, given that the report recommends that the SEC do nothing on the specific proposals (and provides good reasons as to why doing nothing is the right approach), only people with time on their hands or a particular interest in ratings need read the report.
View study here (links externally to SEC website).