References to Credit Ratings

SIFMA provides comments to the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) regarding implementation of Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd0-Frank Act).

Section 939A requires the agencies to review references to, and requirements regarding, credit rating agencies in any agency regulation that requires the use of an assessment of creditworthiness of a security or money market instrument, to remove references to or requirement of reliance on such credit ratings in such regulations and to substitute standards of creditworthiness determined by each agency as appropriate for its regulations. The ANPR requests comments on alternatives to use the credit ratings in the agencies’ risk-based capital rules, market risk rules, and advanced approaches rules (collectively the “risk-based capital standards”) including the Basel Committee on Banking Supervision’s recently proposed changes to the Basel Capital Accord, which could affect the agencies’ risk-based capital standards.

SIFMA supports the efforts of Congress, the Securities and Exchange Commission (SEC), and international regulators to improve the accountability of rating agencies and increase transparency and competition within the market. SIFMA supports parallel efforts by Congress, banking agencies, the Financial Stability Board (FSB), and the Basel Committee to reduce the risk of undue reliance on external credit ratings, particularly for complex securitization exposures. However, SIFMA is concerned that the agencies’ proposals in the ANPR could go too far and effectively prohibit the use of external credit ratings as one element of creditworthiness for purposes of risk-based capital standards. SIFMA respectfully submits that nothing in the statutory language or the legislative history of Section 939A requires this result, and encourages the agencies to urge Congress to amend the statute to clarify that credit ratings can be used as an element of creditworthiness.