S&P’s steps to further manage potential conflicts of interest, strengthen the ratings process, and better serve the markets
Analytics: Enhancing Quality of Ratings Analysis and Opinions
Improve surveillance process through: (a) additional resources and ongoing separation of new rating and rating surveillance functions in Structured Finance (b) strengthen surveillance in Corporates & Governments through the expanded use of search and market based tools and through oversight of surveillance separate from the business, and (c) regular adding of surveillance tools to make the surveillance process more timely and effective. »Progress
In Structured Finance Ratings, we:
- Have increased our RMBS Surveillance staff
- Are integrating RMBS loan specific data into our credit and cash flow models
- Are incorporating new capabilities gained as part of acquisition of iMake, a leading global provider of structured cash flow models and data
For Corporate & Government Ratings, we:
-Have developed a market pricing monitor to alert analyst to credits trading outside our expected range
- Have deployed text-based search tools for U.S. corporate issuers’ filings
We continue to identify and evaluate additional methods of improving surveillance and will update the market as they are implemented.
Establish a Model Oversight Committee within the Quantitative Analytics Group, which will be separate from and independent of the business unit, to assess and validate the quality of data and models used in our analytical processes. »Progress
- We have developed an enhanced training curriculum and increased our annual analyst training requirements by 25%.
- We are evaluating third-party firms to establish an independent credit analyst certification program. We expect development of this program to begin by year-end 2008.
Complement traditional credit ratings analysis by highlighting non-default risk factors such as liquidity, volatility, correlation and recovery, that can influence the valuation and performance of rated securities and portfolios of these securities. »Progress
We have identified a list of non-default risk factors and will begin market validation in Q2 2008. We have requested feedback from market participants by mid-year and will commence research coverage by year-end 2008.