Who regulates a rating agency?
The capital market regulator regulates rating agencies in most regions. In India, the capital markets regulator, the Securities and Exchange Board of India (SEBI), regulates the rating agencies in the country. SEBI laid down an extensive set of regulations for rating agencies in 1999. Moreover, the credit rating industry has many structural features, which ensure that any rating agency aspiring for long-term success acts responsibly, failing which its credibility and consequently its business would be eroded. Regulation of rating agencies is typically concerned with ensuring that only reputable entities are allowed to set up rating agencies and that adequate safeguards are in place to manage the conflicts of interest that arise with respect to both the rating agency and its employees. Regulation that is more intensive or intrusive than this has not resulted in any incremental benefits.
Related Questions
- What kind of responsibility or accountability will attach to a rating agency if an investor, who makes his investment decision on the basis of its rating, incurs a loss on the investment?
- Is it possible that not satisfied with the rating assigned by one rating agency, an issuer approaches another, in the hope of getting a better result?
- What further restrictions does SWIP impose on the Fund over and above the requirements by the regulator and rating agency?
