Credit Rating Services Act, 2012 (Act No. 24 of 2012)Board NoticesCredit Rating Agency RulesPart IV : Quality and Integrity of Credit Ratings7. Quality of the rating process |
| (1) | A credit rating agency must adopt, implement and enforce written procedures to ensure that a credit rating that the agency publishes is based on a thorough analysis of all information known to the agency that is relevant to its analysis according to its published rating methodology. |
| (2) | In assessing an issuer's creditworthiness, an analyst involved in the preparation or review of any rating action must use methodologies established by the credit rating agency. An analyst must apply the methodologies in a consistent manner, as determined by the credit rating agency. |
| (3) | Credit ratings must be assigned by the credit rating agency and not by any individual analyst employed by the agency. |
| (4) | A credit rating agency must use employees who, individually or collectively (particularly where rating committees are used) have appropriate knowledge and experience in developing the type of credit rating being applied. |
| (5) | A credit rating agency and an analyst employed by it must take steps to avoid issuing any credit analysis or report that contains misrepresentations or are otherwise misleading as to the general creditworthiness of a rated entity or obligation. |
| (6) | A credit rating agency must ensure that it has and devotes sufficient resources to carry out high-quality credit analysis of all obligations of the rated entity it rates. |
| (7) | When deciding whether to rate or continue rating an obligation or rated entity, a credit rating agency must assess whether it is able to devote sufficient personnel with sufficient skill sets to make a proper rating assessment and whether its personnel will have access to sufficient information needed in order to make such an assessment and must refrain from rating or continue rating the obligation or rated entity in those circumstances where a proper rating assessment is not possible. |
| (8) | Where a credit rating agency is using an existing credit rating prepared by another credit rating agency with respect to underlying assets or structured finance instruments, it may not refuse to issue a credit rating of an entity or a security or a financial instrument because a portion of the entity or the security or the financial instrument had been previously rated by another credit rating agency. |
| (9) | A credit rating agency must adopt reasonable measures so that the information it uses in assigning a credit rating is of sufficient quality to support a reliable and credible credit rating. If the credit rating involves a type of security or financial instrument presenting limited historical data (such as an innovative financial vehicle or instrument, or special purpose vehicle), the credit rating agency must publish the limitations of the credit rating in a prominent place, form and manner. |
| (10) | A credit rating agency must establish a review function made up of one or more senior managers with appropriate experience to review the feasibility of providing a credit rating for a type of structure that is materially different from the structures the credit rating agency currently rates, and if not feasible refrain from providing a credit rating. |
| (11) | A credit rating agency must include an attestation with any credit rating it issues affirming— |
| (a) | that no part of the rating was influenced by any other business activities of the credit rating agency; |
| (b) | that the rating was based solely on the merits of the rated entity, security or financial instrument being rated; |
| (c) | that such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument. |