U.S. regulators say credit raters can manage some conflicts

WASHINGTON Thu Nov 21, 2013 6:04pm EST

WASHINGTON Nov 21 (Reuters) - Credit-rating agencies that also offer consulting and risk-management services are taking proper steps to mitigate potential conflicts of interest and should not face additional regulations, the Securities and Exchange Commission said on Thursday.

The SEC posted a study online saying firms such as Moody's , McGraw Hill's Standard & Poor's and Fitch Ratings adequately manage potential conflicts through their existing policies and procedures.

"At this time, the staff does not believe that it is warranted to recommend to the Commission changes to the rules" concerning credit-raters that also offer non-rating services, the study concluded.

"The staff will continue to consider and monitor the potential conflicts of interest posed by the provision of ancillary services," it added.

The SEC's study on credit-rating agencies' independence was one of many required by the 2010 Dodd-Frank Wall Street reform law.

Its findings mark a bit of a victory for the credit-rating sector, which has faced an onslaught of criticism for giving overly rosy ratings to subprime mortgage securities leading up to the 2007-2009 financial crisis.

Many critics have said that built-in conflicts of interest by the credit-rating agency business model were to blame, because companies pay for credit ratings.

The SEC study, however, looked at potential conflicts that could arise at firms that offer non-rating services, like consulting.

The SEC in the past has raised concerns about possible conflicts, such as whether a rating decision could be influenced by a company's decision to buy other non-rating services.

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