CHICAGO - Standard & Poor's has formed a risk oversight committee, created an analyst rotation program, and is requiring additional loan level data from issuers of new resident mortgage-based securities as part of its efforts to improve credit transparency, the company reported last week.
The rating agency said the report marked a first in a series of updates it plans on various initiatives first announced in February that it has said are aimed at improving transparency in hopes of restoring investor confidence in the ratings process.
"We have made significant progress in implementing the actions we announced in February, which are designed to enhance independence, strengthen the ratings process, and increase transparency," Deven Sharma, president of Standard & Poor's, said in the update. "We view this as a substantive first step and look forward to continuing to engage with market participants and policymakers as we implement our enhancements and consider additional measures."
As part of its review of its analytic model and processes, Standard & Poor's is hiring a director of model quality, incorporating additional loan level data into its structured finance surveillance function, increasing analysts training, and launching an analyst certification program.
On the governance side, the agency has begun a search for an ombudsman, will create an enterprise risk oversight committee, will rotate analysts, will review the work of any analyst who leaves to join an issuer or financial adviser, and will create a policy governance group to develop and approve new ratings policies and procedures.
All of the major rating agencies have come under fire as contributors to the current financial crisis for assigning high credit marks to securities backed by subprime residential mortgages and other complex credit products that have now collapsed.
