Tuesday, June 24, 2008

SEC proposals may diminish credit ratings role

(Reuters) The U.S. Securities and Exchange Commission plans to propose rules that may diminish the importance of credit ratings across various markets, the Wall Street Journal reported on Tuesday.

One proposal, to be unveiled Wednesday, would make it possible for U.S. money-market funds to invest in short-term debt without regard to ratings put on those securities by firms such as Moody's Investors Service and Standard & Poor's, the Journal reported, citing people familiar with the matter.

Currently, SEC rules generally require that money-market funds purchase only short-term debt with high investment-grade ratings, the Journal said.

The SEC also will propose rules that may diminish the importance of credit ratings in determining the amount of capital that investment banks are required to hold, the Journal reported.

The renewed effort is part of a push in the United States and Europe amid the credit crunch that has devastated many banks and investors, the Journal said, adding that rating Moody's Corp's Moody's Investors Service, McGraw-Hill Cos' Standard & Poor's and Fimalac SA's Fitch Ratings have been blamed by some for underestimating the risk of default on hundreds of billions of dollars of mortgage debt.

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