Johannesburg - Legislators have approved new laws to
regulate credit ratings companies, and to ensure that they become more
accountable and transparent.
The Credit Rating Services Bill, adopted by the National
Assembly in Cape Town yesterday, requires ratings companies to be registered
with the Financial Services Board to ensure that they have the necessary
knowledge and experience to issue credit assessments.
“We require credit ratings agencies to have certainty,
consistency, a clear legislative framework and above all harmonisation of our
legislation with international standards,” Finance Minister Pravin Gordhan told
“We must dismiss any idea that credit ratings agencies will
have their independence interfered with. What this legislation does is ensure
we have proper accountability to an independent regulator.”
Standard & Poor’s, Moody’s Investors Service and Fitch
Ratings are among the ratings companies that operate in South Africa.
Most of the main shortcomings identified in an initial draft
of the law had been addressed, said Tim Harris, a legislator for the Democratic
Alliance, which voted in favour of the legislation.
“We managed to take out clauses that would have prevented
credit ratings agencies from limiting their own liability through individual
contracts,” he said.
“We made significant progress in limiting the power of the
registrar. The legislation is now definitely in better shape.”
Gordhan dismissed Harris’ concern that a clause in the law
suggested that all credit ratings produced offshore for use in South Africa
needed local endorsement.
“What we are saying is if you are using a rating that is
provided by an agency that is outside of the geography of South Africa, that
agency must be registered with the Financial Services Board,” Gordhan said.
Standard & Poor’s and Moody’s have lowered their ratings
on South Africa’s sovereign debt since September 27, citing an increase in
political risk after strikes in the mining and transport industries.
Standard & Poor’s rates South African debt at BBB, one
level lower than Moody’s.
On October 25, Gordhan rejected the downgrades as
unwarranted and premature.
The National Assembly delayed a planned vote on the
Financial Markets Bill – which will establish a regulatory framework for
unlisted securities, require derivatives to be traded through clearing houses
and introduce additional measures to combat insider trading – until November 6.
“Monitoring every derivative is a difficult task,” Gordhan
“Part of the objective in this legislation and globally is
to make as transparent as possible the trade in derivatives.”