The FCA has written a Dear CEO portfolio supervision letter to the credit rating agency sector. Its strategy continues to be driven by:
- addressing the inherent conflicts of interest with in the CRA business model;
- heavy reliance on non-UK based operations;
- the impact on financial markets of poor quality ratings that are not properly monitored and updated; and
- a desire to see how CRAs are innovating.
It is looking to firms to be able to show:
- that they have strong governance and oversight procedures, following its 2022 letter on governance;
- how they uphold the principle of independence in their methodology and individual ratings process; and
- how CRAs have addressed the weaknesses in operational resilience they identified in themselves in an FCA questionnaire.
The letter also suggest the FCA will be looking at how to deal with the CRA Regulation which is currently still in the form of assimilated law.