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S&P CAPITAL IQ/
S&P's Leadership Actions
On February 7, 2008, Standard & Poor’s announced actions to further strengthen the ratings process and help restore confidence in the capital markets. The actions fell into the following four categories and are further described below:
- Information and
- Investor Education.
Since the 2008 announcement, we have made significant investments and enhancements to our business. We have strengthened our governance and control framework by reviewing the quality and performance of our ratings and identifying areas for improvement; developing and enhancing the criteria we use to rate issues and issuers; interpreting and applying new regulations so we meet compliance requirements; and identifying and reporting on key areas of risk.
Significant areas of investment and change include:
- Establishing the governance and control framework and significantly enhancing staffing levels, compliance and quality reviews of credit ratings actions and the independent review and approval of criteria.
- Making significant updates to our criteria consistent with our ratings definitions. Criteria for most of the major asset classes has been rewritten and calibrated to the ratings definitions. On balance, our criteria now looks for stronger credit characteristics for securities seeking higher ratings.
- Enhancing analytical training and education. In addition to increasing the number of hours required for continuing education, we introduced a new Analytical Certification Program which all analysts must pass in order to act as a primary analyst on a rating or to vote in a rating committee. We have also implemented measures regarding staffing levels.
- Creating an independent Model Validation Group with responsibility for reviewing models used in the ratings process. We have also made changes to enhance the ratings process with respect to data and information as well as introduced additional analysis such as sensitivity scenarios.
- Enhancing compliance oversight and training including areas such as the prohibition on structuring or providing advice to issuers.
S&P’s governance and control areas function independently of the analytic and commercial groups within Standard & Poor’s Ratings Services.
S&P invested approximately $63 million in these areas in 2009 and $80 million in 2010. We forecast $12 million to $15 million incremental increase in costs for these areas in 2011.
While S&P has been undertaking its own changes, changes have occurred in regulations for credit rating agencies resulting in far greater accountability to, and oversight by, regulators around the world. S&P has taken major steps to meet these new regulatory expectations and integrate our reform initiatives into them.
Consequently, we have re-evaluated the voluntary actions we announced in 2008 in the context of the new regulations and this document provides a final update on these initiatives.To review the final update click here.
To review the final Ombudsman report click here.