IOSCO consults on Other CRA Products and their use by market participants

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The Board of the International Organization of Securities Commissions (IOSCO) has published a consultation report titled Other CRA Products, which seeks further insight into how market participants use non-traditional, products or services offered by credit rating agencies (CRAs).

The objective of the consultation report is to clarify information provided by respondents to two survey questionnaires on Other CRA Products that IOSCO published on its website in 2015. The report also asks respondents to comment on IOSCO’s current understanding of these CRA products and services and how they differ from the traditional issuer-paid or subscriber-paid credit ratings.

Other CRA Products are certain non-traditional, credit-related products and services. They are important because market participants may use them to make investment and other credit-related decisions. Issuers and obligors may also use these products to make decisions about whether to obtain a credit rating from a particular CRA.

To gain a better understanding of Other CRA Products, IOSCO consulted market participants through the questionnaires and organized multiple panel discussions with CRAs, users of Other CRA Products and other market participants.

The goal of the first questionnaire was to determine the difference between traditional credit ratings and other credit-related products. The second questionnaire was aimed at learning how issuers, investors and others utilize and understand Other CRA Products. After reviewing the responses to the questionnaires and conducting additional consultation with several respondents, IOSCO made three main observations:

  • Some Other CRA Products share some common processes and features with traditional
    credit ratings. For example, CRAs develop a number of Other CRA Products using the same
    credit rating analysts who determine traditional credit ratings;
  • CRAs tend to create separate structures or business line organizations to offer Other CRA
  • Other CRA Products can be categorized in six primary groups, which are described and
    analyzed in chapter five of the consultation report.

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