Canada Proposes New Rules for Ratings Agencies

November 3, 2010 by · Leave a Comment
Filed under: The Rating Agencies 

In an effort to reduce the risk of credit rating agencies’ conflicts of interests, the Canadian Securities Administrators (CSA) are proposing a requirement that credit rating agencies apply to become “designated rating organizations,” or DROs. These DROs would then be required to establish policies and procedures to manage conflicts of interest.

In a statement posted on CSA’s web site, Jean St-Gelais, chairman of the CSA, said that because investors rely on credit ratings when making investments and ratings continue to be referred to within securities legislation, it is necessary to develop a formal regulatory oversight of credit rating organizations. St-Gelais also explained that “This CSA initiative is consistent with international developments in addressing the oversight of credit rating agencies, which can have a significant impact upon financial markets.”

Although the new regulations will provide Canadian regulators with the power to demand changes in the way agencies operate, the proposal stops short of overseeing credit rating content or methodology.

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