The Securities and Exchange Commission’s top official overseeing credit-rating firms said that the agency is rethinking its post-crisis effort to improve the quality of bond ratings, a tacit acknowledgment that the decade-old program has been a failure, the Wall Street Journal reported. Jessica Kane, who heads the agency’s Office of Credit Ratings, said that the SEC is now seeking input on ways to limit the pressure firms such as S&P Global Inc. and Moody’s Corp. face to boost bond ratings. Bond issuers, which benefit from higher ratings, pay the ratings firms to grade the bonds. After the 2008 financial crisis, credit-rating firms were criticized for taking lucrative fees and giving high grades to risky securities that later caused big losses for investors. The Dodd-Frank Act’s financial overhaul in 2010 created the SEC’s Office of Credit Ratings to monitor ratings firms and perform annual examinations of their books and procedures. Kane said that her agency needs more authority to expand those examinations and asked Congress for a “statutory change” that would enable it to do so. After the financial crisis, the SEC didn’t end the practice of bond issuers hiring the firms that rate their offerings. Instead, the SEC decided to encourage ratings firms to publish unsolicited ratings on securities they weren’t hired to analyze. The agency crafted a rule to give them access to deal data to publish such ratings.
