THE regulatory wheels are slowly turning, with ASIC today unveiling the formal licensing rules for ratings agencies that require them to be registered and subject to an array of obligations.
Many of these would already be part of the agencies’ normal practice, but the key change is to formally register them and hold them to annual reviews.
In the aftermath of the financial crisis, rating agencies came under attack because triple-A rated paper was shown to be best suited for use in the toilet, yet billion-dollar investment decisions were made on the back of the advice.
The industry has a fundamental conflict in that the people who want the rating pay for it, so there is a potential inducement for the ratings agencies to write the advice to suit the client.
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