WASHINGTON – The FDIC on Tuesday took its first step toward eliminating the use of credit ratings in rules for banks, under a mandate of the new financial overhaul law and issued for comment proposed alternatives to relying on credit rating agencies to assess the risk of investments.
The bank reform law enacted last month calls for reducing the influence of the three big rating agencies – Moody's Investors Service, Standard & Poor's and Fitch Ratings, which were widely discredited for giving high ratings to risky mortgage securities.
The bank regulatory agencies are expected to follow with proposed new rules and eventually to adopt the changes. The process could take months.
As big a problem as reliance on credit ratings became in the financial crisis, "finding an alternative is going to be very, very difficult," FDIC Chairman Sheila Bair said.
