Handbook on International Best Practices in Credit Rating

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ISBN: 978-971-561-754-3

Paperback (Publication Date: December 2008)
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Credit rating is one of the key elements for the development of bond markets. ADB believes that international best practices in rating, particularly those aim to address conflict of interest in rating complex products in line with recent IOSCO recommendations, are essential for Asian domestic credit rating agencies (DCRAs) to adopt. International best practices will help enhance comparability of rating among credit rating agencies—domestic and global—and give investors greater confidence in DCRAs' ratings. The Handbook should also serve as a reference for regulators in the region in regulating credit rating agencies to ensure that DCRAs meet the highest standards of the international organization of securities regulators.

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Introduction

Summary of the Main Recommendations

2.1 Essential Best Practices

2.2 Desirable Best Practices

2.3 Three-Phase Implementation

Essential Best Practices

3.1 Pre-Rating Requirements

3.2 Rating Definitions and Recognition of Default

3.3 Policies and Processes for Ratings

3.4 Confidentiality Requirements

3.5 Independence and Avoidance of Conflicts of Interest

3.6 Policies For Private, Unsolicited, and Unaccepted Ratings

3.7 General Code of Conduct

3.8 Compliance with Policies and Process

3.9 Conducting Outreach

3.10 Relations with Regulator and Other DCRAs

Desirable Best Practices

4.1 Computation of Default Statistics

4.2 Dedicated Advanced Functional Groups

4.3 DCRAs Engaged In Other Businesses

4.4 Use of Rating Enhancers as Early Warning Indicators

4.5 Publication of Rating Criteria

4.6 Market Feedback before Major Policy Changes

Implementation Schedule for Domestic Credit Rating Agencies

Appendix 1 Mapping of Rating Scales for Domestic Credit Rating Agencies Compliant with Best Practices

Appendix 2 The International Organization of Securities Commissions Code of Conduct

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Handbook on International Best Practices in Credit Rating

Contents