SEC explores further credit rating reforms

By Rachelle Younglai

WASHINGTON (Reuters) - Top U.S. securities regulators questioned Wall Street's reliance on credit ratings and weighed changes for the industry, which has been blamed for contributing to the financial crisis.

At a day-long meeting on Wednesday, the Securities and Exchange Commission asked credit agencies, academics and investors about a range of issues such as how to boost competition among raters and whether a new business model for credit agencies was needed.

SEC Chairman Mary Schapiro asked whether government agencies and the SEC should continue to require reliance on credit ratings, an issue that divided the rating industry.

The SEC already has a pending proposal to wean Wall Street and investors off ratings. But the mutual fund and brokerage industry oppose the proposal, saying ratings give investors faith in the funds and create standards for assessing credit risks.

At Wednesday's meeting, credit rating agencies provided a mixed response.

"To have less reliance on ratings is probably good," said Daniel Curry, the president of DBRS Ltd.

But Curry said it was important to do this gradually to allow market participants to adjust to ratings being withdrawn from federal rules.

Realpoint LLC Chief Executive Robert Dobilas and Egan-Jones Ratings Company co-founder Sean Egan favored having references to ratings in federal rules. Fitch Ratings President Stephen Joynt said there was value in having credit ratings used by regulators and others as 'benchmarks,' but said ratings should not be the only thing they relied on.