South Africa's Treasury has released for public comment the Credit Ratings Services Bill, which seeks to regulate credit rating agencies according to international best practice, while improving investor protection and the efficiency and transparency of financial markets.
In a statement this week, the Treasury said the Bill seeks to align South Africa's regulation of credit rating agencies with international best standards and practice, including the International Organisation of Securities Commissions Principles, G-20 countries' regulation, and the European Union's equivalency requirement.
The Bill further aims to improve investor protection and the efficiency and transparency of financial markets, and reduce systematic risk.
"It also aims to protect the independence, integrity, transparency and reliability of the credit rating process and credit ratings," the Treasury said.
According to the statement, credit ratings agencies are important actors in financial markets, providing independent advice to investors on issues including sovereign debt.
By providing the market with independent, consistent, easy-to-use measures of credit risk, these rating agencies reduce the costs of investment and enhance market efficiency.
Global response required
During the 2008-09 global financial crisis, weaknesses in the way these agencies rated particularly "subprime" securitised instruments highlighted the need to re-examine the way in which such agencies operate.
"In particular, given that globally financial institutions and institutional investors rely heavily on external ratings, such ratings should be constructed in an independent, transparent and rigorous way."
Any weaknesses in this respect can generate uncertainty and exacerbate volatile markets, which can trigger general financial instability, the Treasury said.
"As these agencies operate at a global level, it became clear a global response was required .... As a result, the G20 jointly committed to regulating these agencies.
"Introducing a regulatory framework for credit ratings agencies is thus one of South Africa's G20 commitments."
The G20 was established in 1999, in the wake of the 1997 Asian financial crisis, to bring together major advanced and emerging economies to stabilise the global financial market.
Workshop in August
The National Treasury and the Financial Services Board have finalised the accompanying notices and regulations, and the Bill and all accompanying documents are available on the National Treasury and Financial Services Board websites.
In addition to inviting comments from all interested stakeholders, the Treasury added that a workshop would also be held in the course of August.
Source: http://www.southafrica.info
In a statement this week, the Treasury said the Bill seeks to align South Africa's regulation of credit rating agencies with international best standards and practice, including the International Organisation of Securities Commissions Principles, G-20 countries' regulation, and the European Union's equivalency requirement.
The Bill further aims to improve investor protection and the efficiency and transparency of financial markets, and reduce systematic risk.
"It also aims to protect the independence, integrity, transparency and reliability of the credit rating process and credit ratings," the Treasury said.
According to the statement, credit ratings agencies are important actors in financial markets, providing independent advice to investors on issues including sovereign debt.
By providing the market with independent, consistent, easy-to-use measures of credit risk, these rating agencies reduce the costs of investment and enhance market efficiency.
Global response required
During the 2008-09 global financial crisis, weaknesses in the way these agencies rated particularly "subprime" securitised instruments highlighted the need to re-examine the way in which such agencies operate.
"In particular, given that globally financial institutions and institutional investors rely heavily on external ratings, such ratings should be constructed in an independent, transparent and rigorous way."
Any weaknesses in this respect can generate uncertainty and exacerbate volatile markets, which can trigger general financial instability, the Treasury said.
"As these agencies operate at a global level, it became clear a global response was required .... As a result, the G20 jointly committed to regulating these agencies.
"Introducing a regulatory framework for credit ratings agencies is thus one of South Africa's G20 commitments."
The G20 was established in 1999, in the wake of the 1997 Asian financial crisis, to bring together major advanced and emerging economies to stabilise the global financial market.
Workshop in August
The National Treasury and the Financial Services Board have finalised the accompanying notices and regulations, and the Bill and all accompanying documents are available on the National Treasury and Financial Services Board websites.
In addition to inviting comments from all interested stakeholders, the Treasury added that a workshop would also be held in the course of August.
Source: http://www.southafrica.info
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