On 28-09-2022, the Securities and Exchange Board of India (‘SEBI’) has issued a circular modifying the guidelines on Credit Ratings supported by Credit Enhancement (‘CE’) to provide for enhanced transparency and improved rating process for CE Ratings. The circular dated 13-06-2019 through which various measures were mandated in reference to credit ratings of securities having explicit credit enhancement feature. These modifications will come into effect from 1-01-2023.
Applicability: Credit ratings of securities that are listed, or proposed to be listed, on a recognized stock exchange.
Key Points:
1. Press release for credit ratings, with or without the CE suffix, backed by specified support considerations shall contain following disclosures:
i. Unsupported ratings without factoring in the explicit credit enhancement or specified support considerations, and
ii. Supported rating after factoring in the explicit credit enhancement or specified support considerations
2. CRAs shall conduct independent due diligence on the nature of specified support consideration and form a definitive internal view / opinion, and, wherever warranted, obtain an independent external legal opinion for ascertaining the strength of the credit enhancement