Responses to the Consultation Report entitled Review of Implementation of The IOSCO Fundamentals of a Code of Conduct For Credit Rating Agencies

COMMENTS RECEIVED ON THE CONSULTATION REPORT Review of Implementation of the IOSCO Fundamentals of a Code of Conduct for Credit Rating Agencies TECHNICAL COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS MAY 2007 Contents 1. Fitch Ratings .................................................................................................................... 4 2. SIFMA.............................................................................................................................. 6 3. IMA .................................................................................................................................. 8 4. DBRS ............................................................................................................................... 9 5. Rating Evidence GmbH ................................................................................................. 11 6. Bundesverband der Ratinganalysten und Ratingadvisor e.V. ........................................ 16 7. Association of British Insurers ........................................................................................ 17 8. Rating and Investment Information, Inc. ....................................................................... 19 9. Creditreform ................................................................................................................... 20 10. German Insurance Association........................................................................................ 22 11. International Banking Federation.................................................................................... 31 12. Zentraler Kreditausschuss ............................................................................................... 35 13. Standard & Poor ́s ........................................................................................................... 37 14. The European Federation of Financial Analysts Societies.............................................. 41 15. Moody ́s Investors Service.............................................................................................. 42 16. A.M. Best Company........................................................................................................ 45 1. Fitch Ratings Thank you for your kind invitation to comment on the Consultation Report, published on February 14, 2007. Fitch fully supports the efforts made by IOSCO towards a principles-based approach to self-regulation for the rating agency industry. Following the release of the IOSCO Code of Conduct Fundamentals for Credit Rating Agencies (“IOSCO Fundamentals”) in December 2004, Fitch was the first global agency, in April 2005, to publish a Code of Conduct (“Fitch’s Code”) which responded to IOSCO’s work. In our view, the Consultation Report is a logical extension of this approach, and is thus a welcome addition to the public debate concerning our sector. We welcome IOSCO’s timely reminder that the IOSCO Fundamentals are based on a “comply or explain” principle, and that deviations from the IOSCO wording in themselves do not necessarily reflect non-compliance with its core principles. We continue to believe that this is a sensible and practical approach, which respects the existence of different business models and leaves market participants to determine whether a deviation in wording is a material concern to them. Similarly, we welcome IOSCO’s steps to clarify its intention in a number of areas. In particular, we note that the Consultation Report highlights that the IOSCO Fundamentals were not intended to create additional third party legal rights, and also that IOSCO did not intend to imply that Rating Assessment Services should be regarded as services ancillary to a ratings business. As noted in the Consultation Report, these matters have on occasion been subject to different interpretations between rating agencies, national regulators and market participants and, as such, Fitch believes that these clarifications will be a constructive addition to any future debate. In addition to these general observations, we have identified two areas where we believe that additional clarification from our side, as a participant in the process, would be helpful. These comments relate to the two specific references that have been made to Fitch with regard to potential variations from the IOSCO fundamentals in the Consultation Report. Provision 2.12: Fee Discussions (page 11) – IOSCO is correct to note the variation from the language of the IOSCO Fundamentals in the corresponding provision within Fitch’s Code (Section 2.12). This variation is publicly disclosed under Section 5 of Fitch’s Code. However, the wording in the Consultation Report is not entirely correct. Fitch’s position may be more accurately summarised as follows: The majori