SEBI tightens disclosure standards |
Indian Markets regulator Securities and Exchange Board of India on Thursday came out with a strict disclosure framework for credit rating agencies by which they will be required to provide the probability of default for various rated instruments. SEBI`s move comes against the backdrop of rising instances of debt defaults and credit rating agencies coming under the scanner in the IL&FS case as well. Sebi has called for having a uniform standard operating procedure (SOP) in tracking and timely recognition of default. The same has to be disclosed on the website of each agency. Sebi has also prescribed disclosure of rating sensitivities in press releases, critical for the end-users to understand the factors that would have the potential to impact the credit worthiness of the entity. Rating agencies will now have a specific section on `Rating Sensitivities` in the press releases, which will explain the broad level of operating and/or financial performance levels that could trigger a rating change, upward and downward. The regulator has also mandated disclosure on liquidity indicators for the end users. The rating agencies will now disclose the liquidity indicators, using terms like “Superior/ Strong”, “Adequate”, “Stretched” and “Poor”.
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