The International Organization of Securities Commissions (IOSCO) wants regulators to get along better when it comes to monitoring large rating agencies. To that end it has recently formally proposed creating a “college of regulators” or “CRA colleges” to help them work better together.
The approach, which IOSCO has been contemplating for a number of years and sees as informal, has mostly the okay of the credit ratings agencies (CRAs) themselves. CRAs have for the most part dodged serious consequences for their role in creating the financial crisis; regulators forming cultured, leafy academia-invoking “colleges” of supervisors to monitor them sounds like they continue to perfect of practice of artful dodging.
In a release, IOSCO said its credit rating agency task force “agreed that greater regulator-to-regulator cooperation through informal mechanisms such as a college of regulators might be the best forum” to accomplish goals such as helping coordinate IOSCO members who regulate credit rating agencies, “serve as a focus of discussion with the CRA industry, or even take on a global compliance examination function itself.”
It will also help a supervisor from one jurisdiction understand the perspectives of a different jurisdiction, the IOSCO said. “The dispersion of internationally active CRA affiliates worldwide presents a challenge to supervisors, as they may only have perspective on the activities of the internationally active
CRA conducted in their jurisdiction,” the organization wrote. IOSCO also sees the CRA colleges as ways to talk about regulation without raising legal or regulatory issues among jurisdictions.
For their part, the CRAs were mostly supportive of the effort, although at least one commenter objected to establishing them at all. Most of the concerns of those CRAs that supported the colleges said confidentiality must be strong. One commenter also suggested stricter parameters for the colleges, suggesting that they be “focused on information sharing and not coordinated supervisory action.” The IOSCO responded that although supervisors could agree to jointly identify risks affecting a CRA, “a CRA college would not be a substitute for the autonomous supervision each member of the college would continue to undertake with respect to the internationally active CRA, nor would the CRA college replace or take precedence over the responsibilities of each supervisor to oversee the CRA.”