S&P to unveil ratings overhaul -papers

Standard & Poor’s Ratings Services is set to announce changes to boost the integrity of its research, such as rotating analysts’ coverage, newspapers said on Thursday. Ratings agencies have come under fire for their role in the U.S. subprime crisis, with critics saying they were too slow to downgrade highly rated securities linked to poor quality mortgages. Some argue that the ratings should not have been assigned in the first place.

The Financial Times said S&P’s plan had 27 “action points” including efforts to examine the accuracy of ratings and to look at elements such as security valuations and liquidity, traditionally not part of ratings analysis. It said the plan would be unveiled on Thursday.

It said analysis would also include the use of “what if” scenarios that would take account of extreme events and there would be reform of governance procedures, including the appointment of an external ombudsman.

The Wall Street Journal said that S&P would rotate lead rating analysts after five years of covering the same company, government bond issuer or structured finance arranger.

The work of analysts who leave S&P to work at a bond issuer will be reviewed to make sure their objectivity was not compromised, it said.

S&P officials in New York and London were not immediately available for comment.

Other ratings agencies are also scrutinizing their procedures. Moody’s Investors Service this week asked for comment on a series of proposals aimed at shaking up structured finance ratings.

Meanwhile, the International Organisation of Securities Commissions (IOSCO), the world’s top market regulators group, said on Wednesday it planned to change the code of conduct for agencies to ban them from helping to design structured products that they also rate. (Reuters)