Dec 31, 2018

SEBI Circular on ‘Guidelines for Enhanced Disclosures by Credit Rating Agencies’

SEBI, by way of a circular dated November 13, 2016, has prescribed enhanced disclosures to be made by Credit Rating Agencies (‘CRAs’) to bring about greater transparency. The disclosures, inter alia, include:

(i)       CRAs to include rationales in the ‘analytical approach’ and ‘liquidity’ sections of the press release, when the rating either relies on support from group companies/ parent company and to highlight parameters like liquid investments or cash balances access to unutilized credit lines, liquidity coverage ratio, adequacy of cash flows for servicing maturing debt obligation etc.;

(ii)     CRAs to analyze the deterioration in the liquidity conditions of the issuer and also take into account any asset-liability mismatch while monitoring repayment schedules;

(iii)    CRAs may treat sharp deviations in bond spreads of debt instruments vis-à-vis relevant benchmark yield as a ‘material event’;

(iv)     CRAs to publish information about the historical average rating transition rates across various rating categories; and

(v)     CRAs to bi-annually furnish data on sharp rating actions in investment grade rating category to stock exchanges and depositories for disclosure on their respective websites.

TAGS

SHARE

DISCLAIMER

These are the views and opinions of the author(s) and do not necessarily reflect the views of the Firm. This article is intended for general information only and does not constitute legal or other advice and you acknowledge that there is no relationship (implied, legal or fiduciary) between you and the author/AZB. AZB does not claim that the article's content or information is accurate, correct or complete, and disclaims all liability for any loss or damage caused through error or omission.