S&P Announces New Actions to Enhance Independence, Strengthen the Ratings Process, and Increase Transparency to Better Serve Global Markets

NEW YORK, Feb. 7 /PRNewswire/ -- Standard & Poor's Ratings Services ("S&P") today announced that we have begun implementing a broad set of new actions to further strengthen our ratings operations and better serve capital markets around the world.

"The ongoing transformation of the financial markets requires us to continue to bring more innovative thinking, greater resources, and improved analytics to the ratings process," said Deven Sharma, president of S&P. "By further enhancing independence, strengthening the ratings process, and increasing transparency, the actions we are taking will serve the public interest by building greater confidence in credit ratings and supporting the efficient operation of the global credit markets."

The actions, which will be implemented throughout S&P's global organization, include enhancements in the following four areas:

-- Governance: S&P is implementing new measures that build on existing governance policies and protections and further strengthen the integrity of the ratings process to ensure its independence, make the effectiveness of our governance even more transparent and to maintain investor confidence. -- Analytics: S&P is taking steps to ensure that our ratings models, processes, and analytical talent continue to be of the highest quality and that S&P remains fully equipped to rate complex financial structures with increasing transparency regarding assumptions. -- Information: S&P is providing market participants with greater transparency about the ratings process and greater clarity about the risks that could cause a change in ratings assumptions. -- Education: S&P is undertaking an extensive educational outreach program to help market participants better understand what a credit rating is -- and is not. The goal is to help them use ratings appropriately.

S&P has already adopted a number of these enhancements and will implement the remainder throughout the year. S&P also is evaluating additional actions and intends to introduce further measures throughout the year.

"This initial set of actions is the product of a comprehensive, formal assessment of our policies and practices conducted in collaboration with an independent third-party expert, as well as active dialogue with market participants, regulators, and legislators. These actions are consistent with our commitment to continuous improvement," said Sharma. "Our goal is not only to enhance specific processes but also to minimize even the potential for perceived conflicts of interest and provide the public a greater understanding of how our ratings are determined, what they mean, and how market trends and events affect them.

"We are committed to playing a leadership role, in collaboration with market participants, regulators, and experts, in addressing the issues currently facing the global credit markets. We will continue to engage with market participants and policymakers on an ongoing basis and consider additional steps in response to the feedback we receive," concluded Sharma.

Highlights of S&P's New Actions

Below are brief descriptions of some of the major new actions that S&P is undertaking. Details of all 27 individual measures that S&P is implementing are available at http://www.spnewactions.com/.

Enhancing Governance -- Establish an Office of the Ombudsman that will address concerns related to potential conflicts of interest and to analytical and governance processes across S&P's businesses that issuers, investors, employees, and other market participants may raise. The Ombudsman will oversee the handling of all issues, with authority to escalate any unresolved matters, as necessary, to the CEO of The McGraw-Hill Companies and the Audit Committee of the Board of Directors. -- Engage an external firm to periodically conduct an independent review of S&P Ratings' compliance and governance processes. This firm will issue a public opinion that addresses whether S&P is effectively managing potential conflicts of interest and maintaining the independence of our ratings. -- Institute periodic rotations for lead analysts. -- Implement "look back" reviews whenever an analyst leaves to work for an issuer to ensure the integrity of prior ratings. Strengthening Analytics -- Complement traditional credit ratings analysis by highlighting non-default risk factors such as liquidity, volatility, correlation, and recovery that can influence the valuation and performance of rated securities and portfolios of these securities. -- Add new surveillance capabilities, including tools, models, and data sets, that will enable S&P to better monitor the performance of collateral pools over time. -- Establish a Model Oversight Committee within the Quantitative Analytics Group, which will be separate from and independent of the business unit, to assess and validate the quality of models and tools. -- Increase annual analyst training requirements, enhance training programs, and establish an analyst certification program. Increasing Transparency of Information -- Develop an identifier that will highlight to the market that the rating is on a securitization or on a new type of instrument. -- Include "what if" scenario analysis in rating reports to explain key rating assumptions and the potential impact on the rating of unexpected events. The goal is to help investors better assess an issue's risk profile. -- Work with issuers and investors to improve disclosure of information on collateral supporting structured securities. -- Request greater minimum portfolio disclosure criteria of issuers of certain structured securities. -- Collect more information about the procedures issuers and originators use to assess the accuracy and integrity of their data and to detect fraud. Educating the Public -- Create a Credit Ratings User Manual and Investor Guidelines to promote better understanding of our ratings process and the role of ratings in the financial markets. -- Establish an Advisory Council with membership that includes risk managers, academics, and former government officials to provide guidance on addressing complex issues and to establish topics for market education. -- Broaden distribution of analysis and opinions via the Web and other media. About Standard & Poor's

Standard & Poor's, a division of The McGraw-Hill Companies , is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research, and data. With approximately 8,500 employees (including wholly owned affiliates) located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/.