U.S. regulators say credit raters can manage some conflicts

Reuters

WASHINGTON, Nov 21 (Reuters) - Credit-rating agencies thatalso offer consulting and risk-management services are takingproper steps to mitigate potential conflicts of interest andshould not face additional regulations, the Securities andExchange Commission said on Thursday.

The SEC posted a study online saying firms such as Moody's, McGraw Hill's Standard & Poor's and Fitch Ratings adequately manage potential conflicts through theirexisting policies and procedures.

"At this time, the staff does not believe that it iswarranted to recommend to the Commission changes to the rules"concerning credit-raters that also offer non-rating services,the study concluded.

"The staff will continue to consider and monitor thepotential conflicts of interest posed by the provision ofancillary services," it added.

The SEC's study on credit-rating agencies' independence wasone of many required by the 2010 Dodd-Frank Wall Street reformlaw.

Its findings mark a bit of a victory for the credit-ratingsector, which has faced an onslaught of criticism for givingoverly rosy ratings to subprime mortgage securities leading upto the 2007-2009 financial crisis.

Many critics have said that built-in conflicts of interestby the credit-rating agency business model were to blame,because companies pay for credit ratings.

The SEC study, however, looked at potential conflicts thatcould arise at firms that offer non-rating services, likeconsulting.

The SEC in the past has raised concerns about possibleconflicts, such as whether a rating decision could be influencedby a company's decision to buy other non-rating services.

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