SEC issues new accreditation rules for credit rating agencies

MANILA, Philippines - Credit rating agencies (CRAs), hired to assess the creditworthiness of companies and debt issuances, will be subject to stringent accreditation and operational requirements.

In a memorandum, the Securities and Exchange Commission (SEC) said it came up with guidelines on the accreditation, operations and Reporting of CRAs “to increase transparency and improve the integrity of credit ratings.”

CRAs are tapped by corporations that plan to offer of issue commercial papers of debt securities like bonds.

Such firms perform credit evaluation of corporations and business projects or of debt issues, assessing the overall creditworthiness of the borrower as a guidance to the investing public.

Under the guidelines, SEC said a CRA should be a stock corporation with a paid-up capital of at least P10 million, which will increase to P15 million after the third year to cover operational improvements.

CRAs should be composed of qualified and independent officers and personnel to conduct rating activities.

For the application for annual accreditation, CRAs are required to submit a list of shareholders and corporate affiliation, other business activities, a written code of conduct, rating scale and criteria, operating procedures, and copy of written agreement with issuers.

Prior to rating the creditworthiness of an issuer or debt security, the CRA should sign a contract to render assessment services.

Local debt watchers include Philippine Rating Services Corp. and Credit Rating and Investors Services Philippines Inc. The top three global credit raters are Fitch Ratings, Standard & Poor’s and Moody’s Investor Service.