SEC sees credit rating agencies improving in compliance, competition

By Anne Sherry, J.D.Two SEC staff reports on credit rating agencies find that the 10 registered NRSROs show improved compliance, increased resources devoted to information technology, and continued competition between the seven smaller firms and the three larger ones (Fitch, Moody’s, and S&P). The staff’s annual report discusses competition, transparency, and conflicts among NRSROs, while the annual exam report summarizes staff examinations of each rating agency.Competition. The annual report reveals that the three large rating agencies together account for 96.4 percent of outstanding ratings, down from 96.5 percent as of the end of 2015. The change is due to the fact that smaller NRSROs have gained market share in the asset-backed securities rating category. Specifically, the smaller agencies have gained ground by rating asset-backed securities backed by newer or unique asset types, or “esoteric” asset-backed securities. Some of the smaller NRSROs…

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