By Yakubu LAAH InvestAdvocate

Lagos (INVESTADVOCATE)-The International Organisation of Securities Commissions (IOSCO) Tuesday said it will establish supervisory colleges for international active credit rating agencies (CRAs)

This is coming on the heels of the publishing of the final report on Supervisory Colleges for Credit Rating Agencies, IOSCO said apart from establishing supervisory colleges for internationally CRAs, it will also provide preliminary guidelines on how to constitute and operate them.

IOSCO said the recommendations are aimed at improving the integrity of CRAs, as part of its effort to enhance investor protection and the fairness, efficiency and transparency of securities markets.

According to IOSCO, G20 leaders are also concerned with the integrity of CRAs and have repeatedly encouraged the commission to work to improve their effectiveness.

IOSCO affirmed that the dispersion of internationally active CRA affiliates worldwide poses a challenge to supervisors, as their perspective may be limited to the CRA activities in their jurisdiction.

“The creation of a CRA college could ultimately enhance the effectiveness of supervisors’ risk assessment and oversight of internationally active CRAs by facilitating information exchange and cooperation among them,” IOSCO said.

IOSCO further defined a supervisory college as a collaborative arrangement between supervisors that seek to promote information sharing, consultation, and cooperation in order to enhance risk assessment of internationally active CRAs and to support effective supervision of such CRAs.

The commission said the type of information that might be discussed or shared, where appropriate, could include inspection or examination of findings with respect to the following:

• CRA´s compliance with local or regional laws and regulations
• The CRA´s implementation and adherence to the IOSCO Code Of Conduct for CRAs
• The establishment and operation of rating models and methodologies, internal controls, procedures to manage conflicts of interest, and procedures for handling material non-public information.

“The role of the CRA college would be to create a mechanism for sharing and discussing this type of information with the goal of promoting a better understanding of the risks faced or posed by an internationally active CRA and how relevant supervisors are addressing these risks. Where desired by members, a CRA college may facilitate consensus recommendations on how to address key risks faced or posed by the CRA through heightened supervision and/or targeted examination and inspection activities, consistent with national laws,” IOSCO said.