The House Financial Services Committee has unanimously approved H.R.6308, the Municipal Bond Fairness Act – a bill requiring rating agencies to ‘establish and maintain credit ratings’ and to ‘define clearly any rating symbol used.’
Commercial Mortgage Securities Association (CMSA) says it strongly supported a Manager's Amendment offered by Chairman Barney Frank, D-Mass., and Ranking Member Spencer Bachus, R-Ala., that would require rating agencies to use and apply a single set of ratings symbols in a consistent manner for all types of securities and money-market instruments.
‘Investors have been concerned about the confusion, uncertainty and implementation issues a new system would create during this challenging time,’ says Dottie Cunningham, CEO of CMSA. ‘We applaud the committee leadership for passing a bill that would require a consistent ratings structure to better serve our markets.’
According to CMSA, the committee-passed legislation reinforces the longstanding understanding that credit ratings are forward-looking opinions that address just one characteristic of fixed income obligations – an assessment of the likelihood that such obligations will be repaid in accordance with their terms. A single and consistent ratings structure is critical to bond investors who want the ability to compare a multitude of investment options across asset classes.
‘Passage of this provision offered by Chairman Frank and Ranking Member Bachus sends a clear message that policymakers, like investors, do not support separate ratings symbols,’ adds Brendan Reilly, senior vice president of CMSA. ‘It is a significant win for investors seeking confidence and certainty in the meaning and use of ratings.’
During Committee consideration of the bill, CMSA's letter on the issue was referenced and included in the hearing record.