SEC to reduce importance of credit ratings for investors and banks

/INTERFAX-AFI, New York, June 24, 08/ - The Securities and Exchanges Commission (SEC) plans to introduce rules reducing importance of credit ratings for the whole range of markets, including monetary market with $3.4 trl. volume, The Wall Street Journal informed. It can be the last strike at business, which has already suffered from credit crisis. The most part of the rules, which will be presented on Wednesday, will allow American funds of short term investments depositing in "short term" debt without considering their ratings, which are appropriated by such agencies as Moody's and Standard & Poor's, the sources, acquainted with the situation, informed newspaper. Today, SEC`s rules oblige such funds to buy only short term debts with the highest investment rating. New rules would give more discretion to managing funds to determine themselves whether the debt corresponds to rating of investment level. Besides, SEC will offer rules, which can reduce importance of credit ratings in determination of demand volume of capital from investments banks. On the whole, new rules will bring dozens of changes in credit ratings` role for investors and banks. Leading world rating agencies S&P, Moody's and Fitch rejected to comment on further changes of SEC`s rules. "My first reaction is - what will be an alternative (for ratings usage - IF-AFI), - Khal Scot, the Law professor in Harvard university declared. "What we need is more confidence that these ratings are correct" - he added. Notwithstanding that rating agencies didn't manage to forecast subprime- mortgage market collapse, that caused losses and worsening of trust, they still play central role in decisions of banks and investors on depositing money. Federal Reserve System takes into account possession of the investment rating by several assets of investment banks. Other international standards, such as Bazel-2 also use their ratings to determine how world banks control their balances. For many years, investors were focusing at ratings and purchased bonds only with rating not less than that of a determined level. Now, many of them will possibly expand the list of rating companies, on which data they will rely while taking decisions on investments Institutional investors, such as pension funds will also review rules on ratings, is marked in the article. Within the frames of measures on increasing competition in this sphere, on June 23 SEC officially admits the tenth company -Realpoint LLC, ex subdivision of GMAC to rate bonds. [2008-06-25]