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Treasury organisations voice concern over code of conduct for rating agencies

Proposals by the International Organization of Securities Commission (IOSCO) to introduce a code of conduct for credit rating agencies (CRAs) are being welcomed by companies and professional associations alike, though with some reservations. The code of conduct comes in response to the major credit defaults of the last few years ? the most notable being Enron ? which have switched the governance spotlight on those rating agencies that failed to predict the defaults.

The UK's Association of Corporate Treasurers (ACT), the US Association for Financial Professionals (AFP) and the Association Français des Trésoriers d'Enterprise - who together represent around 18,700 corporate treasurers ? submitted a joint statement in response to the IOSCO's draft code published last month.

The associations welcomed the introduction of a code of conduct but strongly disagreed with proposals that agencies should be obliged to publicly disclose information from the companies they rate.

In the statement they say: ?It would totally change the relationship of trust needed for issuers to make full and proper disclosure to a CRA, to the detriment of issuers and investors generally.?

Northern Trust Global Investments voiced strong support for the proposed code of conduct. Wayne Bowers, head of global fixed income, says: ?We see it as a positive step towards providing an international framework for rating agency reforms that are broad-based yet flexible enough to be accommodated in a variety of jurisdictions.

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