Hon Chairperson, credit rating agencies have been criticised for their role in the global financial crisis. They were blamed, inter alia, for failing to detect the worsening financial market conditions and to adapt their ratings timeously; failing to adapt to the new risks of the credit market, as well as some of them lowering their ratings due to pressure introduced by competition; and contributing to the crisis because of poor quality of some of the ratings of structured financial instruments.
Now, the G20 response to the financial crisis recommended that credit rating agencies whose ratings are used for regulatory purposes should be subjected to a regulatory oversight regime that includes registration.
Why is this? Credit rating agencies issue opinions on the creditworthiness of a particular issuer of a financial instrument or the likelihood that an issuer will honour its financial obligations, such as a country, and that is where we have downgrades of sovereign ratings. These opinions carry considerable weight in financial markets, both in terms of business practice and regulatory requirements.
This Bill aims to ensure responsible and accountable credit rating agencies and to protect the integrity, transparency and reliability of the whole process and their ratings and to improve investor protection.
The Bill was substantially improved following public submissions on the Bill as introduced. Delictual liability has been watered down and the powers of the registrar and Financial Services Board, FSB, have been limited. Now, it must be stressed that this Bill is not a response to the recent downgrades. The ACDP agrees that sovereign downgrades are a very serious matter and that such credit agencies should be regulated; therefore, we do support this Bill, notwithstanding the reservations expressed by other members and the reservations that we also have. Thank you very much, Chairperson. [Applause.]