The Australian Securities and Investments Commission (ASIC) has released a consultation paper on the form and content of the compliance report that each of Australia’s credit rating agencies must lodge with ASIC annually as part of moves to help boost the integrity and standards of Australia’s financial system.


Consultation Paper 160 Credit rating agencies: IOSCO Code Annual Compliance Report (CP 160) proposes implementing reporting requirements for credit rating agencies (CRAs) concerning their compliance with obligations on matters such as the quality and integrity of their ratings process, conflicts of interest management and the transparency and timeliness of ratings disclosure.


ASIC Chairman, Greg Medcraft, said the proposals – which are the subject of consultation with industry – are aimed at requiring CRAs to detail how they’ve met their licence conditions, which include complying with the International Organization of Securities Commissions’ (IOSCO) Code of Conduct Fundamentals for CRAs.


‘ASIC sees establishing reporting standards, together with setting Australian financial services (AFS) licence conditions and ongoing industry-wider surveillance, as its core regulatory tools in supervising CRAs,’ Mr Medcraft said.


‘Reporting by CRAs helps give ASIC, and therefore the broader market, insight into the operations of CRAs and as such, some degree of reassurance to investors in the integrity of issued credit ratings.’

Specifically, the proposed reporting requirement would require CRAs to provide a narrative description of any implemented or planned measures that have the aim of ensuring compliance with eleven obligations referrable to the IOSCO Code and the CRAs’ AFS licence conditions.

'We consider that the information reported in the compliance report will provide ASIC with a form of comfort that the CRAs have measures in place designed to ensure that they comply with their obligations, at a reasonable compliance cost to CRAs,’ Mr Medcraft said.


Consultation with industry on the proposals in the paper will continue until 13 July 2011, after which ASIC will consider implementing the reporting requirement, taking into account the results of the consultation.


The consultation paper is available here