Deven Sharma, president of S&P announced new actions to enhance independence, strengthen the ratings process and increase transparency to better serve global markets. He stated: “The ongoing transformation of the financial markets requires us to continue to bring more innovative thinking, greater resources, and improved analytics to the ratings process. By further enhancing independence, strengthening the ratings process, and increasing transparency, the actions we are taking will serve the public interest by building greater confidence in credit ratings and supporting the efficient operation of the global credit markets.”
The actions, which will be implemented throughout S&P’s global organization, include enhancements in the following four areas:
- Governance: S&P is implementing new measures that build on existing governance policies and protections and further strengthen the integrity of the ratings process to ensure its independence, make the effectiveness of our governance even more transparent and to maintain investor confidence.
- Analytics: S&P is taking steps to ensure that our ratings models, processes, and analytical talent continue to be of the highest quality and that S&P remains fully equipped to rate complex financial structures with increasing transparency regarding assumptions.
- Information: S&P is providing market participants with greater transparency about the ratings process and greater clarity about the risks that could cause a change in ratings assumptions.
- Education: S&P is undertaking an extensive educational outreach program to help market participants better understand what a credit rating is – and is not. The goal is to help them use ratings appropriately.
S&P has already adopted a number of these enhancements and will implement the remainder throughout the year. S&P also is evaluating additional actions and intends to introduce further measures throughout the year.
“This initial set of actions is the product of a comprehensive, formal assessment of our policies and practices conducted in collaboration with an independent third-party expert, as well as active dialogue with market participants, regulators, and legislators. These actions are consistent with our commitment to continuous improvement,” said Sharma. “Our goal is not only to enhance specific processes but also to minimize even the potential for perceived conflicts of interest and provide the public a greater understanding of how our ratings are determined, what they mean, and how market trends and events affect them. ”We are committed to playing a leadership role, in collaboration with market participants, regulators, and experts, in addressing the issues currently facing the global credit markets. We will continue to engage with market participants and policymakers on an ongoing basis and consider additional steps in response to the feedback we receive,” concluded Sharma.
Details of all 27 individual measures that S&P is implementing are available at http://www.spnewactions.com/.
Standard & Poor’s, a division of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research, and data. With approximately 8,500 employees (including wholly owned affiliates) located in 21 countries, Standard & Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com.