The agency of credit ratings should be explaining how and if the Code of Conduct ends up deviating from the fundamentals of Code and how these deviations end up achieving the goals laid over within the fundamentals of Code and the principles of IOSCO-CRA.Several concerns have been expressed by a number of market participants regarding the absence of transparency over ratings methodologies, processes, practices, and procedures of the agencies. With respect to this, the Code of IOSCO lays stress on the promotion of transparency and improvement of ability in regulators and participants of market for judging if an agency has been implemented satisfactorily by the fundamental of code.
This will be permitting the regulators and participants of market for drawing on own conclusion, if there is implementation of Code Fundamentals by the agency to their limit of satisfaction and for giving reactions accordingly. CEST tends to be going further and proposing, as the option of self- regulation, the need for introduction of some certain rules and regulations with respect to fair representation. This will be helpful in the establishment of minimum scope of disclosure over the assumptions and elements, in return clarifying the market investors and operators for understanding the determination of specific rating by the agency of credit rating. The extent and nature of information being available for the public still involves variations from agencies to agencies. Since the IOSCO Code was published and integrated within the Code of Conduct of the agencies, there has been an increase in lengthy research publications and report on their web pages, while publishing key criteria utilized for the assessment of credit risk within the bid of improving transparency. However, the key perception is yet known to be extremely widespread that the employed weights, variables and methodologies of agencies, and the criteria utilized within the deliberations of committees being opaque to both the borrowers and investors. The CESR combined the entire issue with the statement “Credit rating agencies should aim for transparency as the best way forward to enable investors and issuers to understand the quality and objectivity of the credit rating. Credit rating agencies should therefore implement measure 2.7 of the IOSCO Code” (CESR 2005, Para. 117).