FSA head calls for regulation of rating agencies

FSA head calls for regulation of rating agencies: "Credit rating agencies should be regulated, the chairman of the U.K.'s financial services regulator said in a wide-ranging report on the regulation of the global banking sector.

In the Wednesday report, Lord Adair Turner, chairman of the London-based Financial Services Authority, said the regulator supports European Commission efforts to bring in regulation for rating agencies. In the report, 'The Turner Review: A regulatory response to the global banking crisis,' Lord Turner said the growth of the credit derivatives market, for example, created the possibility that the use of credit ratings in counterparty collateral arrangements would produce a 'strong procyclical effect.' For example, he said, the threatened rating agency downgrade of American International Group Inc. in September 2008 'led to severe liquidity strain.'

Among other things, Lord Turner said 'there are concerns about whether the governance of rating agencies has adequately addressed issues relating to conflict of interest and analytical independence.'"

For Source and Full Article Visit: Business Insurance