S&P aims to boost ratings confidence with overhaul

By Jonathan Stempel and Richard Barley

S&P, a unit of the McGraw-Hill Companies Inc , announced 27 steps that it said were aimed at boosting confidence in credit ratings.

Regulators and politicians are looking closely at the ratings agencies' business model, where ratings are paid for by issuers rather than investors, and also the efforts they have made to ensure the accuracy and reliability of ratings.

Sharma said the aim was to minimize "even the potential for perceived conflicts of interest" and to provide the public with greater understanding of ratings.

"I think what they're doing is a step in the right direction, but I think the regulators will have their say," he said. "Whether it really addresses all these calls for transparency, we'll have to see."

S&P said it would establish an ombudsman who would look at these potential conflicts and would engage an external firm to review compliance and governance processes periodically. In addition, lead analysts would periodically be rotated and their work would be reviewed if an analyst left the company to work for an issuer.

S&P said its analysis would include the use of "what if" scenarios that would take account of extreme events and would more clearly flag ratings on securitizations and new types of instrument.

Other ratings agencies are also reviewing their procedures. Moody's Investors Service this week asked for comment on a series of proposals aimed at shaking up structured finance ratings.

Agencies said they were working together with regulators to address their concerns.