THE world’s leading industrialised countries, the Group of 20 (G-20), have committed to regulating ratings agencies and SA’s introduction of a regulatory framework for credit ratings agencies in August last year is one of its G-20 commitments.
The Credit Ratings Services Bill seeks to align the South African regulation of ratings agencies with international best practice, including the International Organisation of Securities Commissions Principles, G-20 countries’ regulation and the European Union’s equivalency requirement.
However, its onerous liability provision came under fire and the bill was not approved in mid-June. Revisions are being deliberated in Parliament, sometimes heatedly.
The bill aims to ensure that authorities can work with their international counterparts to ensure responsible and accountable credit rating globally.
It aims also to protect the independence, integrity, transparency and reliability of the process and of ratings, improve investor protection and the efficiency and transparency of financial markets and to reduce systemic risk. The bill’s passage through Parliament was delayed in June by the standing committee on finance, because of concerns about the legal ramifications and accountability it would place on agencies, for example by making them endorse ratings done outside of SA. It was feared less advice and access to services would be available.
Last month, the Treasury said it wanted Parliament to pass four or five new laws on financial market regulation before the year-end. These are the Credit Ratings Services Bill, the Banks Amendment Bill, Financial Markets Bill, Financial Services General Laws Amendment Bill and the Insurance Laws Amendment Bill.
In Europe, a law to force a three-year rotation of agencies has been delayed due to concerns about quality, with the UK and Germany the loudest opponents.