IOSCO-UPDATE 1-Israel regulator cracks down on credit agencies

(Adds details on rating agencies, bond market, bylines)

By Tova Cohen and Rachelle Younglai

TEL AVIV, June 7 (Reuters) - Israel's securities regulator said on Sunday he plans to introduce a proposal within three months to hold credit rating agencies more accountable for their ratings.

Israel Securities Authority Chairman Zohar Goshen said there should be liability for rating agencies, which have been blamed for contributing to the financial crisis by assigning top ratings to mortgage securities that later dropped in value.

"Rating agencies are being considered as writing opinion," he told Reuters on the sidelines of an international securities conference in Tel Aviv. "That is like giving you advice about a movie. We believe it should be a little bit more than that because a lot of trust is given to the rating agencies," he said.

Global regulators are taking steps to rein in rating agencies like Moody's Corp (MCO.N) and McGraw-Hill Cos Inc's (MHP.N) Standard & Poor's, both of which have subsidiaries in Israel. U.S. securities regulators have adopted rules to improve the agencies' business conduct and now require more disclosure about a security's underlying assets.

But some policymakers believe more has to be done.

Legislation has been introduced in the U.S. Senate that would allow investors to sue credit rating agencies that recklessly failed to review key information in developing a rating. It is unclear whether the bill has any chance of becoming law.

Goshen said liability should be based on "gross negligence" and said he was fairly confident he had the support needed to pass the law in the Israeli legislature, the Knesset.