Senator Nick Sherry, Minister for Superannuation and Corporate Law, today welcomed the endorsement of Australia's regulatory response to credit rating agencies (CRAs) by key international securities body, the International Organisation of Securities Commissions (IOSCO).
"The Rudd Government acted early on credit ratings agencies – we reviewed the issue, assessed the problem and acted decisively. The peak global body has now roundly endorsed Australia's response."
"This is another example of where the Rudd Government has moved effectively to deal with the impacts of the global financial crisis in Australia," Minister Sherry said.
In a statement, IOSCO said: "… the IOSCO CRA Code serves as a template for regulation… In this way, conflicts of law can be avoided and common expectations with regard to CRA activity will be more easily satisfied. Several jurisdictions are in the process of establishing CRA regulation based on the IOSCO CRA Code, including Australia, Canada, the European Union and Japan".
The Government announced in November 2008, that from 1 July, 2009, all CRAs operating in Australia will be regulated by the Australian Securities and Investment Commission and will be required to have an Australian Financial Services License (AFSL). As a condition of their AFSL, the CRAs will also need to issue an Annual Compliance Report based directly on their compliance with the IOSCO CRA Code.
'From July 1, all ratings agencies must be licensed and will be required to issue an Annual Compliance Report based on how they've conformed with global rules on issues such as conflicts of interest management.
"It is completely unacceptable to have such a systemically important set of entities such as ratings agencies operating in Australia but sitting entirely outside our regulatory system."
"Our decision to require CRA Code compliance reporting locks Australia into world's best practice,' Minister Sherry said.
The Rudd Government also welcomed IOSCO's decision to form a permanent standing committee on CRAs to replace the ad hoc Taskforce on CRAs.
This month, Minister Sherry, Treasury and ASIC Chairman Tony D'Aloisio convened two roundtables with banking and finance industry representatives to discuss how to improve the usefulness and quality of ratings issued by credit rating agencies.
IOSCO's statement and CRA reports can be found at www.iosco.org.