Code of Conduct for Credit Rating Agencies

Credit rating agenices must adhere to a strict code of conduct.

In September 2003, the International Organization of Securities Commission established a code of conduct for credit rating agencies. The overall goal for the code of conduct is the oversight of investor and public protection and transparency and fairness in business practices.

Integrity

The code of conduct provides for specific integrity standards. A few of these include detailed written procedures, efficient internal records, a consistent rating process and upfront information. Credit rating agencies are obligated to review credit reports and update client records regularly.

Responsibility

Credit reporting agencies must conduct business practices using only factors that are specifically related to the credit rating. Agencies need to ensure that they maintain appropriate professionalism and objectivity.

Conflicts of Interest

A credit rating agency must have specific policies and procedures in place for identifying and managing conflicts of interest. All conflicts of interest must be disclosed to the appropriate individuals. The areas of rating and oversight should be separated, and different employees should work in each section.

References

• The Technical Committee of the International Organization of Securities Commission: Code of Conduct for Credit Rating Agencies