Credit rating agencies to change core business practices

As per a press release from New York Times, 3 of country's largest credit rating firms, Moody's Investors Service, Fitch Ratings and Standard & Poor's, are going to have an agreement with NY AG, Andrew M. Cuomo to change few of their core business practices because of which these firms were under scrutiny from New York Attorney General's office.

These 3 firms had played a critical role which caused the mortgage securities mess by awarding certain type of security packages Triple-A ratings allowing investors like insurance companies & pension funds to purchase them.

According to the present procedures banks are allowed to shop for suitable ratings as they have to pay only if the rating is acceptable to them. For some years now charges regarding conflict of interest have been raised as investment banks were paying for the credit ratings but earlier, those who were purchasing the mortgage loans, the investors, used to hire & pay for the credit rating services.

According to the proposed agreement, credit rating agencies would be required to stage their fees for all the steps leading up to the credit rating as well as for the credit rating itself. In addition to it, every 3 months the credit rating agencies will have to report on all deals that they were given to rate & all that they actually rated.