Supervisory colleges of credit rating agencies

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In a new report, IOSCO details the benefits of creating “supervisory colleges” for internationally active credit rating agencies (“CRAs”).

In Supervisory colleges of credit rating agencies, IOSCO said that “the dispersion of internationally active affiliated NCAs around the world presents a challenge to supervisors” as it gives them only a limited perspective on the activities of NCAs in their jurisdictions. To address this issue, IOSCO recommends developing a “college of regulators” to function as a forum for exchanging information on internationally active rating agencies and promoting “cooperation to improve assessment risks … and to support effective oversight of these agencies”. IOSCO noted that a “college of CRAs was considered less likely to raise legal or regulatory issues between different IOSCO jurisdictions” than other types of bodies.

Potential benefits, as noted in the report, include:

  • improved quality of supervision resulting from the broader information base that could be available through more regular exchanges of information;

  • improving the ability to assess the risks of a particular ARC;

  • promote the pursuit of common regulatory objectives; and

  • operational efficiencies.

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