The regulatory landscape for CRAs is experiencing a shift globally. The current wave has its roots in financial crisis of 2008 and role of CRAs in the same. Pursuant to the International Organization of Securities Commissions’ (IOSCO) Code of Conduct Fundamentals for Credit Rating Agencies (CRAs) of May 2008, a number of jurisdictions have undertaken various regulatory measures to strengthen oversight on CRAs and to raise the underlying standards. In the same spirit, the Securities and Exchange Commission of Pakistan (The Commission) reviewed the existing regulatory framework for CRAs.SECP has issued revised Code of Conduct for Credit Rating Companies / Agencies in January 2014. The Code encompasses three broad areas:
(a) Quality & Integrity of the Rating Process
(b) Independence & Avoidance of Conflicts of Interest
(c) Responsibilities (including Disclosure requirements)
PACRA appreciates SECP’s efforts and finds the Code a step in the right direction for the capacity building of CRAs. Comprehensive in nature, the Code emphasizes upon building structural strength leading to enhancing the credibility of processes and procedures associated with the credit rating. The Code also reiterates the leading role of the CRAs in the development of the capital markets by way of instructing them to organize public awareness and training programs for market participants. In essence, the Code augers well for the CRA industry and serves as a milestone in its transition into the next stage of development.