October 18, 2019: The Securities Exchange Commission of Pakistan has introduced amendments in the Credit Rating Companies Regulations, 2016, in order to provide more conducive regulatory environment for them.
According to a press release issued by SECP here on Friday, credit rating agencies play vital role in development of financial markets and conduct independent, professional and impartial assessment of the credit risk associated with a particular instrument or a corporate entity.
The amendments have been designed while considering the dynamics of local industry and international best practices.
The changes in regulatory framework aim at providing ease of doing business and promoting rating business without compromising quality of ratings.
To provide the ease of doing business and reduce cost of business, the SECP has abolished the requirements for disengagement period of two years for private ratings, submission of annual accounts of associated concerns and obtaining documents relating to default status of associated concern.
In addition, the requirements for submission of industry specific studies, additional copies of application, submission of updated resume, and dissemination of the financial statements of Companies Regularization Scheme (CRCs) on their website also removed.
To encourage new professional entrants with extensive research experience, individuals have been allowed to hold 40% of shareholding of Credit Rating Company. To ensure that CRCs focus on their core function, CRCs have been allowed to outsource their internal audit and compliance functions to independent chartered accountants firms.
The regulations would result in reducing regulatory burden on CRCs with special emphasis upon building structural strength leading to enhancing the credibility of processes and procedure associated with the credit rating.
The changes in regulations will improve standards, provide ease of doing business and encourage entrance of new players in market, has amended Credit Rating Companies Regulations 2016.