Credit rating agency/Timelines

Abbreviations:
CRA refers to credit rating agency,
SEC refers to the Securities and Exchange Commission,
S&P refers to Standard & Poor.

Regulation of the Agencies

1934

• Securities Exchange Act of 1934[1] - confers powers on the SEC to regulate the securities industry

1975

• The SEC confers Nationally Recognized Statistical Rating Organizations status on qualifying CRAs and embodies that term in the regulation of financial intermediaries.

2002

• Sarbanes-Oxley Act - requires the SEC to conduct a study of the role and function of the CRAs.

2006

• Congress passed the Credit Rating Agency Reform Act[2] that provided the SEC with authority to impose registration, recordkeeping, and reporting rules on credit rating agencies registered as Nationally Recognized Statistical Rating Organizations (NRSRO). Currently, 10 credit rating agencies are registered with the Commission as NRSROs as defined by the Act.

2009

• April European Community adopts new regulation concerning credit rating agencies[3]
• July US Government proposal for regulation of CRAs sent to the Congress for approval[4]
• September SEC Votes on Measures to Further Strengthen Oversight of CRAs[5]
• October Accountability and Transparency in Rating Agencies Act[6] passed by the House of Representatives
• December SEC Amendments to Rules for Nationally Recognized Statistical Rating Organizations[7]

Defaults of rated corporations

1994

• Mexican financial crisis[8] - shortly after a CRA upgrade (default averted by IMF rescue)

1997/8

• Asian financial crisis[9] - not predicted by CRAs

2001.

• Enron collapse - Enron given investment-grade ratings until 4 days before it collapsed.

2002.

• WorldCom bankruptcy[10] - 3 months after receiving an investment-grade rating.
• Global Crossing Ltd defaults on loans in July after being given an investment grade rating in March[11].
• AT&T Canada was rated investment grade in early February and defaulted in September.

2007.

• Moody's and S&P downgrade subprime mortgage bonds[12] - from top (AAA) investment grade to junk (CCC) [13]

2008.

• Lehman Brothers and AIG collapse - holding investment grade ratings by the S&P, Moody's and Fitch agencies[14]