Canadian Underwriter

Credit rating agencies to be topic of U.S. House hearing

March 25, 2003   by Canadian Underwriter

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A subcommittee of the U.S. House Committee on Financial Services is set to hold hearings into the role of credit rating agencies. The Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises will commence hearings on April 2 entitled “Rating the Rating Agencies: the State of Transparency and Competition”.
The hearings follow a Senate report in October 2002 which was highly critical of the agencies’ performance preceding the collapse of Enron, whose debt was rated “investor grade” just days before it filed for bankruptcy.
A poll conducted late last year by the U.S. Association of Financial Professionals (AFP) revealed that 29% of companies felt their credit rating was inaccurate to some degree. Respondents also questioned the timeliness of ratings changes and 90% said that the Securities Exchange Commission should take a more active role in monitoring credit rating agencies.

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