Standard & Poor's President Deven Sharma today called on European policymakers to base their proposed system of supervising credit rating agencies on internationally accepted principles and standards, in order to ensure a consistent approach globally to the issue and ensure ratings opinions remain comparable worldwide.
Speaking at the Eurofi conference in Nice, France, Mr Sharma said an enhanced oversight regime in Europe for ratings agencies could help in the process of restoring market confidence. To be effective, however, it needs to be internationally consistent, recognising the global nature of debt markets and ratings agencies; it should explicitly preserve the independence of ratings opinions and methodologies; and there should be an effective single point of entry for registration, supervision and co-ordination.
He urged policymakers to focus any new supervisory system on compliance with the IOSCO code of conduct, which is widely accepted by regulators and market participants worldwide as an appropriate set of standards for ratings agencies.
Mr Sharma noted there were concerns among ratings users that the European Commission's current proposals for ratings agencies - which envisage a new set of requirements specifically for the European Union - may have unintended consequences for investors and debt issuers in the region.
"Judging by the responses we have seen in recent days from the market and member states, there is considerable concern that the Commission's proposals will not achieve its very laudable aims," Mr Sharma said. "One of the biggest concerns is that supervisors may be placed in a position where they have to second-guess the content of individual ratings."
"We must ensure that any proposed framework does not, despite best intentions, risk creating further costs, inefficiencies and disruption for the European capital market. The emerging consensus among regulators and the market is that any new regulation in Europe should be aligned with IOSCO's standards for ratings agencies.
Mr Sharma added that Standard & Poor's was keen to work with the Commission and other parties to help define a regime for ratings agencies in Europe that meets the objectives of policymakers and the needs of the market as a whole. At the same time, he noted, Standard & Poor's is committed to continuing to raise transparency and to further improving its analytics and processes.