The Call for Evidence quotes from the draft code for participants in the rating industry (including issuers) produced by the ACT, AFP and AFTE, and supported by the Eurozone and International treasury associations1. That embodies our collective views.
The draft code has been drafted with the intention of being as practicable as possible. The idea of sticking to a code rather than to a regulatory basis to govern the relationship between issuers and rating agencies is because we recognise that such provisions have to be developed on a global basis. Regulation is best restricted to provision of a general framework.
The draft code was developed for the corporate (non-financial) sector – and includes a section applicable to such issuers as well as a section for rating agencies. CESR and CEBR’s scope is wider – embracing structured finance, financial sector and sovereign ratings as well. However, few changes would be needed in the wider application.
We are also aware of the IOSCO work in this area to produce the essentials of a code of conduct and we hope, after their paper is published, to amend the code produced by the treasury associations to be complementary in the corporate ratings field to the IOSCO document.
The four key issues identified by the Commission and quoted in the Call for Evidence are of course addressed in the treasury associations’ draft.