Regulators should allay rating concerns: S&P

Standard and Poor’s today said that there is room for more business models in the credit rating industry, but the regulator should allay any concerns about conflicts of interest.

“The discussion of potential business models for rating firms should focus on the benefits all market participants would receive. In examining the benefits, six requirements emerged as the key areas of focus for ratings. They are transparency, prevention of conflicts, quality, breadth of coverage, market scrutiny, and investor choice,” S&P said in a paper titled ‘An examination of how investor needs are served by various ratings business models.

The paper examines the advantages and disadvantages of the issuer-fee, subscriber-fee and government utility business models for ratings firms.

“We believe that there is room for several business models in the credit rating industry. Although each business model presents its own potential conflicts, we believe that appropriate regulatory oversight should allay concerns about conflicts of interest,” said Deven Sharma, President of S&P.

S&P looks forward to assisting regulators and policymakers in crafting fair, effective, and transparent regulation that will serve our global markets going forward, the paper added.