COBS 9.2 COBS 9.2 Quality of the rating process
A Credit Rating Agency must adopt, implement and enforce written procedures to ensure that the opinions it disseminates are based on a thorough analysis of all information known to the Credit Rating Agency that is relevant to its analysis according to the Credit Rating Agency's published rating methodology.
A Credit Rating Agency must use rating methodologies that are rigorous, systematic, and, where possible, result in ratings that can be subjected to some form of objective validation based on historical experience.
In assessing an issuer's creditworthiness, analysts involved in the preparation or review of any rating action must use methodologies established by the Credit Rating Agency. Analysts must apply a given methodology in a consistent manner, as determined by the Credit Rating Agency.
Credit ratings must be assigned by the Credit Rating Agency and not by any individual analyst employed by the Credit Rating Agency; ratings must reflect all information known, and believed to be relevant, to the Credit Rating Agency, consistent with its published methodology; and the Credit Rating Agency must use people who, individually or collectively (particularly where rating committees are used) have appropriate knowledge and experience in developing a rating opinion for the type of credit being applied.
A Credit Rating Agency and its analysts must take steps to avoid issuing any credit analyses or reports that contain misrepresentations or are otherwise misleading as to the general creditworthiness of an issuer or obligation.
A Credit Rating Agency must ensure that it has and devotes sufficient resources to carry out high-quality credit assessments of all obligations and issuers it rates. When deciding whether to rate or continue rating an obligation or issuer, it must assess whether it is able to devote sufficient personnel with sufficient skill sets to make a proper rating assessment, and whether its personnel likely will have access to sufficient information needed in order make such an assessment. A Credit Rating Agency must adopt reasonable measures so that the information it uses in assigning a rating is of sufficient quality to support a credible rating. If the rating involves a type of financial product presenting limited historical data (such as an innovative financial vehicle), the Credit Rating Agency must make clear, in a prominent place, the limitations of the rating.
A Credit Rating Agency must establish a review function made up of one or more senior managers with appropriate experience to review the feasibility of providing a credit rating for a type of structure that is materially different from the structures the Credit Rating Agency currently rates.
A Credit Rating Agency must establish and implement a rigorous and formal review function responsible for periodically reviewing the methodologies and models and significant changes to the methodologies and models it uses. Where feasible and appropriate for the size and scope of its credit rating services, this function must be independent of the business lines that are principally responsible for rating various classes of issuers and obligations.
A Credit Rating Agency must assess whether existing methodologies and models for determining credit ratings of structured products are appropriate when the risk characteristics of the assets underlying a structured product change materially. In cases where the complexity or structure of a new type of structured product or the lack of robust data about the assets underlying the structured product raise serious questions as to whether the Credit Rating Agency can determine a credible credit rating for the security, Credit Rating Agency must refrain from issuing a credit rating.
A Credit Rating Agency must structure its rating teams to promote continuity and avoid bias in the rating process.