Sebi said credit rating agencies will have to compare two consecutive rating actions.
New Delhi:
Capital markets regulator SEBI on Friday extended the disclosure norms for credit rating agencies (CRAs) and laid down a framework for rating clearance of permanent debt securities.
The Securities and Exchange Board of India (SEBI) said in a circular that the move is aimed at allowing investors and other stakeholders to make fair use of such disclosures in the fair evaluation of CRAs.
The new framework will be applicable to the credit rating of securities which are already listed or are proposed to be listed on the stock exchange.
In order to standardize the methodology relating to disclosure of ‘rapid rating action’, SEBI said that the CRA will have to compare two consecutive rating actions.
In addition, a CRA must disclose an uptrend rating action if the rating change between two consecutive rating actions is greater than or equal to three notches downgrade.
The regulator has mandated CRAs to frame detailed guidelines on what constitutes non-cooperation by issuers, including non-submission of quarterly financial results within the stipulated time frame, current and past operating details about capex schemes, debt obligations and repayment details. , and others are included. Any other issue considered appropriate by the credit rating agency as per its internal assessment.
The CRA should have a detailed policy with regard to the methodology for assessing the risk of non-availability of information from issuers including non-cooperating issuers and the steps to be taken under different scenarios to detect non-cooperation. issuing company.
“CRAs shall follow a similar practice of non-submission of no-default statements (NDS) (or inability to validate loan servicing on time through other sources) for three consecutive months, so that ratings not cooperating ( INC) for consideration and shall tag such rating as INC within a period of 7 days of three consecutive months of non-deposit of NDS,” SEBI said.
It further said that the CRA in its judgment may transfer a rating to INC category before the expiry of three consecutive months of non-receipt of NDS.
When withdrawing any credit rating of listed securities, or planning to be listed on exchanges, a CRA shall assign a credit rating to such security in its press release, except where any outstanding under the security rated by the CRA is not a liability. , or the company whose security has been assessed has been liquidated or merged with another firm.
In order to facilitate the withdrawal of rating of permanent debt securities that are listed or proposed to be listed, SEBI has amended the rules whereby the CRA shall withdraw the rating of such securities after the rating agency has evaluated such securities for 5 consecutive years. could; or has obtained an undertaking from the issuer as well as other CRAs that a rating is available on such securities.
Under the current rating withdrawal provisions, it was observed that in case of rating of permanent debt securities like AT-I bonds, the credit rating cannot be withdrawn unless the security is redeemed. Often, this can result in such bond issuers ceasing to cooperate with the CRA.
In order to facilitate greater transparency and usability of disclosures made by CRAs on their websites, SEBI stated that these disclosures should be in Excel or machine readable format and a repository of disclosures should be maintained on their website for at least 10 years . This also includes rating press releases by CRA.
In addition, the CRA will have to separately disclose two other cumulative default rates (CDRs) limited to the credit rating of the securities.
The framework relating to Sharp Rating Action will come into effect from the first half of the financial year 2022-23, for issuers that are not cooperating as of March 31, 2023, enhanced disclosures for disclosures made after March 31, 2023 and related Withdrawal for ratings will be applicable for ratings withdrawn after 30th September.
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