Credit rating agency/Timelines: Difference between revisions
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:''Abbreviations:<br> CRA refers to credit rating agency, <br>SEC refers to the Securities and Exchange | :''Abbreviations:<br> CRA refers to credit rating agency, <br>SEC refers to the Securities and Exchange Commission, <br> S&P refers to Standard & Poor''. | ||
==Regulation of the Agencies== | ==Regulation of the Agencies== | ||
===1934=== | |||
* Securities Exchange Act of 1934[http://www.sec.gov/about/laws/sea34.pdf] - confers powers on the SEC to regulate the securities industry | |||
===1975=== | ===1975=== | ||
* The | * The SEC confers Nationally Recognized Statistical Rating Organizations status on qualifying CRAs and embodies that term in the regulation of financial intermediaries. | ||
===2002=== | ===2002=== | ||
* Sarbanes-Oxley Act - requires the SEC to conduct a study of the role and function of | * Sarbanes-Oxley Act - requires the SEC to conduct a study of the role and function of the CRAs. | ||
===2006=== | ===2006=== | ||
| Line 16: | Line 18: | ||
*April European Community adopts new regulation concerning credit rating agencies[http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/629] | *April European Community adopts new regulation concerning credit rating agencies[http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/629] | ||
*July US Government proposal for regulation of CRAs sent to the Congress for approval[http://www.ustreas.gov/press/releases/tg223.htm] | *July US Government proposal for regulation of CRAs sent to the Congress for approval[http://www.ustreas.gov/press/releases/tg223.htm] | ||
*September SEC Votes on Measures to Further Strengthen Oversight of | *September SEC Votes on Measures to Further Strengthen Oversight of CRAs[http://www.sec.gov/news/press/2009/2009-200.htm] | ||
*October ''Accountability and Transparency in Rating Agencies Act''[http://www.house.gov/apps/list/speech/financialsvcs_dem/credit_rating_agencies_draft.pdfhttp://www.house.gov/apps/list/speech/financialsvcs_dem/credit_rating_agencies_draft.pdf.] passed by the House of Representatives | *October ''Accountability and Transparency in Rating Agencies Act''[http://www.house.gov/apps/list/speech/financialsvcs_dem/credit_rating_agencies_draft.pdfhttp://www.house.gov/apps/list/speech/financialsvcs_dem/credit_rating_agencies_draft.pdf.] passed by the House of Representatives | ||
*December SEC Amendments to Rules for Nationally Recognized Statistical Rating Organizations[http://www.sec.gov/rules/final/2009/34-61050fr.pdf] | *December SEC Amendments to Rules for Nationally Recognized Statistical Rating Organizations[http://www.sec.gov/rules/final/2009/34-61050fr.pdf] | ||
==Defaults of rated corporations== | ==Defaults of rated corporations== | ||
===2001=== | ===1994=== | ||
* Mexican financial crisis[http://papers.ssrn.com/sol3/papers.cfm?abstract_id=298262] - shortly after a CRA upgrade (default averted by IMF rescue) | |||
===1997/8=== | |||
* Asian financial crisis[http://papers.ssrn.com/sol3/papers.cfm?abstract_id=298262] - not predicted by CRAs | |||
===2001.=== | |||
* Enron collapse - Enron given investment-grade ratings until 4 days before it collapsed. | * Enron collapse - Enron given investment-grade ratings until 4 days before it collapsed. | ||
===2002=== | ===2002.=== | ||
* WorldCom bankruptcy[http://www.moodyskmv.com/research/files/WorldCom.pdf] - 3 months after receiving an investment-grade rating. | * WorldCom bankruptcy[http://www.moodyskmv.com/research/files/WorldCom.pdf] - 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[http://news.bbc.co.uk/1/hi/business/1709967.stm]. | * Global Crossing Ltd defaults on loans in July after being given an investment grade rating in March[http://news.bbc.co.uk/1/hi/business/1709967.stm]. | ||
* AT&T Canada was rated investment grade in early February and defaulted in September. | |||
===2007=== | ===2007.=== | ||
* Moody's and S&P downgrade subprime mortgage bonds[http://www.allbusiness.com/banking-finance/banking-lending-credit-services/8909480-1.html] | * Moody's and S&P downgrade subprime mortgage bonds[http://www.allbusiness.com/banking-finance/banking-lending-credit-services/8909480-1.html] - from top (AAA) investment grade to junk (CCC) [http://www.businessweek.com/magazine/content/07_40/b4052061.htm] | ||
===2008=== | ===2008.=== | ||
* Lehman Brothers and AIG collapse - holding investment grade ratings by the S&P, Moody's and Fitch agencies[http://www.huffingtonpost.com/2009/09/30/credit-rating-agency-anal_n_305587.html] | * Lehman Brothers and AIG collapse - holding investment grade ratings by the S&P, Moody's and Fitch agencies[http://www.huffingtonpost.com/2009/09/30/credit-rating-agency-anal_n_305587.html] | ||
Latest revision as of 08:38, 4 March 2010
- 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]