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Steps to eliminate credit ratings for banks
Federal regulators have taken a first step towards eliminating the use of credit ratings in rules for banks, under a mandate of the new financial overhaul law.
The board of the Federal Deposit Insurance Corp voted on Tuesday to take public comment on alternatives to relying on credit rating agencies to assess the risk of investments.
The landmark law enacted last month calls for reducing the influence of the three big rating agencies – Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.
The agencies were discredited in the financial crisis for giving high ratings to risky mortgage securities.
The FDIC is expected to follow with a proposed new rule by the agency and eventually adopt the changes. The process could take months.