Markets regulator Sebi on Wednesday came out with a new framework for credit rating agencies (CRAs), involving ratings of securities having explicit credit enhancement features.
The new framework, applicable from January 1, 2023, is aimed at enhancing transparency and improving the rating process, the Securities and Exchange Board of India (Sebi) said in a circular.
Under the rule, CRAs can assign the suffix ‘CE’ (Credit Enhancement) to the rating of instruments having explicit credit enhancement.
To enable investors to understand the extent of credit enhancement provided by a third party or parent or group company and support considerations specified by the regulator, including debt backed by a pledge of shares and a letter of comfort, Sebi said that the press release for credit ratings, with or without the CE-suffix, backed by such support considerations need to contain certain disclosures.
These disclosures are unsupported ratings without factoring in the explicit credit …
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