Recent comments by the ACT underline the fact that introducing adequate competition into the ratings marketplace goes far beyond increasing the number of ratings providers.
In its initial response to the US Securities & Exchange Commission (SEC) Interim Report on the regulation of ratings agencies (see March Treasurer), the ACT points out that the time spent by key corporate executives in managing relationships with ratings agencies and in preparing information for reviews constrains a company’s ability to allocate its ratings business beyond one or two providers. In addition, the time which would need to be devoted to bringing a new ratings provider up to speed on its business is a significant bar to “switching” between ratings agencies.