Kuala Lumpur, 30 March 2011
SC to enhance oversight on Credit Rating Agencies (CRAs)
The Securities Commission Malaysia (SC) today issued Guidelines on the Registration of Credit Rating Agencies (Guidelines) to ensure independent and high quality ratings with appropriate oversight of the credit rating agencies (CRAs), given their key role in capital markets.
The Guidelines enhance the agencies’ standards in key areas such as transparency of rating criteria and policies, objectivity of rating process, managing conflicts of interest, and will also enable the SC to supervise CRAs in a more vigorous manner.
In January 2006, Malaysia was ahead of many jurisdictions when an effective regulatory and supervisory framework on the domestic credit rating agencies (CRAs) was established. Nonetheless, global regulatory and supervisory standards on CRAs have recently experienced a dramatic shift after the global financial crisis. Revisions to the International Organization of Securities Commissions (IOSCO)’s Objectives and Principles of Securities Regulation in June 2010 now subject CRAs to adequate levels of oversight, through a system of registration and on-going supervision.
Major jurisdictions, including the United States, European Union, Japan, Australia and India have also undertaken various regulatory measures to strengthen oversight on CRAs and to raise the standards of CRAs.
The SC engaged in structured consultations with key players comprising institutional investors, credit rating agencies, issuers, advisors and trustees in the domestic bond market, on the development of these Guidelines, which will enable Malaysia’s credit rating agencies to converge with the international standards and best practices set out by IOSCO and other advanced jurisdictions.
These Guidelines supersede the Practice Note on Recognition of Credit Rating Agencies for the Purpose of Rating Bond Issue, issued by the SC on 25 January 2006. A copy of the Guidelines is now available here.
SECURITIES COMMISSION MALAYSIA