Tag Archive | Roy Havemann

Credit Ratings Services Bill gets cool reception

Roy Havemann, acting chief director in the tax and financial sector policy unit at treasury, together with Ismail Momoniat deputy director of treasury, came under considerable pressure when presenting the department’s response to public hearings on the Credit Rating Services Bill. One MP stated that the new Bill attempted to opt out of common law liability and that this maybe was unconstitutional.

Ismail Momoniat responded with the fact that South African and the world had been through “tumultuous times” and whilst there was a role for credit rating agencies, the events of 2008 had resulted in draconian legislation around the world such as was South Africa’s proposed credit rating law before them.

In broadly summing up treasury’ response to the hearings, Havemann acknowledged the seven written submissions that had been received, which included Standard & Poor, Moodys and Investec, and said that a response document of some forty pages was posted on their website but in general terms Treasury felt it had to ignore complaints on the subject of violation of free speech.

Both treasury officials said that the current global recession was a direct result of what had gone wrong in the banking and financial services world and whilst, they said, rating was largely a matter of opinion and nobody could or should regulate on this, the question of how opinion was reached and by whom it was opined now had to be regulated if the public was to be protected.

Havemann confirmed that certain issues and criticism on rating processes “had been taken on board” and would be incorporated as detailed in the response document but that the Bill would remain in “plain language” because it had to be read and understood by ordinary investors and “buzz” language and short terms had to be avoided. He noted that there had been no objections to “outsourcing” and treasury therefore assumed that this was accepted in general terms.

He said treasury officials remained committed to the principle that ratings had to be exercised only by agencies that contained a South African element within their structure but a rating could be carried out by an agency with a head office overseas provided the agency was registered in SA.

The Credit Ratings Services Bill is designed to play a critical role in regulating independent advice to investors, including such on sovereign debt, equities and other investment products, Havemann said. Such had been necessitated by what has been evidenced of recent in the financial market place.

During the global financial crisis no such oversight happened, said Momoniat interjected, and the world has re-examined the way in which such agencies operate and have internationally moved provide appropriate regulation. He added that two factors had to be dealt with, since response does not work after the event because of the speed at which modern transactions take place and how markets change within seconds. Secondly, the way markets now operate also had to be re-examined and the fact that responsibility for transactions has moved right down the line to supervisory level had changed the financial environment.

Havemann concluded by saying that in tabling such a bill, national treasury had exercised a judgement call and that in terms of G-20 agreements, although not binding, had jointly committed South Africa to regulation of credit rating agencies.

He added, “In producing a regulatory framework. we have tended to follow US moves in this regard and not that of the EU”.

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