Global coordination and assigning
211. The CRAs we heard from were broadly welcoming
of new regulation. Stephen Joynt, President of Fitch Rating, confirmed
that the agencies were all feeding into the European process and
noted that the "the issues that are being presented there
in a way are constructive for the industry". He told us that
the agencies "do not agree with every facet of it and some
of the implementation will be costly and difficult, but we feel
pretty good about it".
Mr Drevon and Mr Bell considered the regulatory proposals important
for bringing back confidence in the system and re-establishing
the credibility of the credit rating industry.
212. All of the CRAs and many of the other submissions
we received called upon the authorities to ensure that global
consistency in regulation was achieved. For example, Mr Bell argued
that credit ratings were, by their nature, global and required
globally consistent regulation:
one of the benefits of ratings is that they create
a global benchmark and therefore if we had a European rating style,
a Japanese rating style and a US rating style all operating in
different ways with different rules and different procedures I
think that would be very damaging for the industry. Some kind
of global consistency, however it is achieved, is therefore very
important we think.
213. The IMA also argued that "any actions taken
in relation to the originate-to-distribute model should be coordinated
at a global level; otherwise they will be ineffective and result
in competitive disadvantage for those who implement them".
214. When discussing the potential for increased
regulation of CRAs, Mr Sants pointed out that the FSA "did
not have a national remit to take [the regulation of CRAs] forward
locally because they are not based here".
The Chancellor also spoke in favour of a global solution suggesting
that a national solution would be inadequate:
Given the nature of what we are dealing with, a solution
in one particular country, especially when institutions are trading
across several, I do not think will be adequate. You need to have
a solution to that certainly at a European-wide level, but also
much wider than that, internationally. For us to have a solution
that is purely directed to the UK would not be enough.
He went on to assert that "if you left America
out of it that would be rather a glaring hole in things given
how important American institutions are".
note that the major credit rating agencies are global organisations.
We call upon the Government to take forward efforts with other
governments so as to ensure that a globally consistent approach
to regulating credit rating agencies is achieved.