Publications
Partners
Parliament - The National Assembly approved the credit ratings services bill unanimously on Thursday.
The bill seeks to ensure that South African authorities can work with their international counterparts to ensure responsible and accountable credit rating agencies at a global level.
It further aims to protect the independence, integrity, transparency, and reliability of the credit rating process and credit ratings; improve investor protection; improve the efficiency and transparency of financial markets; and reduce systemic risk.
According to the National Treasury, credit ratings agencies are important actors in financial markets, and are designed to play a critical role in providing independent advice to investors, including on sovereign debt, equities, and other investment products.
By providing the market with independent, consistent, and easy to use measures of credit risk, credit ratings agencies reduce the costs of investment and enhance market efficiency.
During the global financial crisis, weaknesses in the way these agencies rated particularly "sub-prime" securitised instruments highlighted the need to re-examine the way in which such agencies operate, especially given that such agencies were not appropriately regulated.
In particular, given that globally financial institutions and institutional investors rely heavily on external ratings, such ratings should be constructed in an independent, transparent and rigorous way.
Any weaknesses in this respect can generate uncertainty and exacerbate volatile markets, which can trigger general financial instability.
As these agencies operate at a global level, it became clear a global response was required. As a result, the G-20 group of countries jointly committed to regulating these agencies.
Introducing a regulatory framework for credit ratings agencies is thus one of South Africa's G-20 commitments.
Thus, the bill seeks to align the South African regulation of CRAs with international best standards and practice, including the International Organisation of Securities Commissions' principles, G-20 countries' regulation, and the European Union's equivalency requirement.
The bill now goes to the National Council of Provinces for concurrence.
