New Liability Has Ratings Agencies Cautious
Rating agencies are concerned about legal liability under the new financial regulation guidelines—though it seems the SEC may have addressed those worries late Thursday.
The bank reform bill, signed into law on Wednesday, can hold credit agencies legally liable in their research and ratings if they're used in public offerings, something from which the agencies were exempt during the financial crisis.
Rating agencies were hoping the Securities and Exchange Commission(SEC) would provide some type of work-around to define the new rule a little more generously for them. They may have seen those hopes fulfilled, as the agency announced late Thursday it will now allow bond issuers a six-month reprieve from including credit ratings in their offering documents, according to a Dow Jones report.
Wall Street has been outraged, calling this yet another unintended consequence of financial regulation.
But is Wall Street making a big deal out of nothing? According to people familiar with the matter, there are only three deals of this sort in the pipeline right now. One of them, Ford Motor , recently postponed an asset-backed debt offeringbecause rating agencies are reluctant to have their ratings cited.
But whatever activity existed, some voices on Wall Street say, now will be halted.
- In Shadow of Overhaul, Ford Yanks Bond Deal
- Obama Signs FinReg Bill Into Law
- Financial Crisis Inquiry Commission: Credit Rating Agencies
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