Regulators to recommend abolishing mandatory ratings

SEOUL (Reuters) - Financial regulators will recommend to the Group of 20 leading economies that they abolish, wherever possible, mandatory credit ratings for institutions or instruments accessing the public debt market, Financial Stability Board chief Mario Draghi said on Wednesday.

"We need to reduce the mechanical reliance on ratings," Draghi told reporters following a meeting of the FSB in Seoul.

The FSB is preparing a series of reports on improving global financial regulation that will be presented to the G20 leaders' meeting in Seoul next month.

The G20 has asked the regulators' forum to devise ways to prevent a repeat of the crisis that dragged the world financial system to the brink of collapse in 2008 and triggered a global recession.

Among other reforms, the G20 wants to reduce the financial system's reliance on credit ratings, concerned about the destabilizing impact of sharp swings in investor confidence caused by ratings downgrades.

The FSB will present a set of recommendations on how to achieve this, including removing the requirement for assets and institutions to be rated by a credit rating agency before accessing the public debt market.

The United States has already passed laws limiting the financial industry's dependence on ratings, while the European Union is still considering similar measures.

(Reporting by Rachel Armstrong and Cheon Jong-woo; Writing by Tomasz Janowski)