Agencies' rating quality control systems

‘Agencies’ rating quality control systems’, stresses the fact that ratings accuracy and quality require agencies to maintain, enforce and document an effective internal control structure that will govern the determination of ratings and wonders if agencies fully comply with rating quality control requirements. This chapter overviews the quality of rating agencies' internal control systems. Internal audit (IA) functions in credit rating agencies (CRA) are faced with additional challenges that are regarded as a key element of agencies' corporate governance frameworks and rating accuracy. Agencies indicate they usually proceed to rigorous and formal review of the rating methodologies and models and significant changes to the rating methodologies and models used. The chapter analyses agencies' behaviour regarding internal control and identifies weaknesses in some of the procedures and supervisory controls governing their rating processes. One way of improving accuracy and consistency of the ratings is by setting efficient technical credit rating committees (TCRCs) that represent a critical mechanism in promoting the quality, consistency and integrity of credit rating process. The chapter concludes the shortcomings in agencies' internal control were identified, includes non-compliance with document retention policies, and lack of adherence to rating committee guidelines. This chapter overviews the quality of rating agencies' internal control systems. Internal audit (IA) functions in credit rating agencies (CRA) are faced with additional challenges that are regarded as a key element of agencies' corporate governance frameworks and rating accuracy. Agencies indicate they usually proceed to rigorous and formal review of the rating methodologies and models and significant changes to the rating methodologies and models used. The chapter analyses agencies' behaviour regarding internal control and identifies weaknesses in some of the procedures and supervisory controls governing their rating processes. One way of improving accuracy and consistency of the ratings is by setting efficient technical credit rating committees (TCRCs) that represent a critical mechanism in promoting the quality, consistency and integrity of credit rating process. The chapter concludes the shortcomings in agencies' internal control were identified, includes non-compliance with document retention policies, and lack of adherence to rating committee guidelines.