IOSCO has published its report on sound practices at large intermediaries in assessing creditworthiness and the use of external credit ratings. It recommends 12 sound practices that regulators could consider as part of their oversight of market intermediaries, including to:
- establish an independent credit assessment function that is clearly separated from other business units;
- establish a coherent oversight structure;
- avoid exposure to particular credit risks whenever the firm does not have the internal capability to independently and adequately assess the exposure; and
- prescribe internal risk levels and investment appetites for the assessment of creditworthiness that focus on the intrinsic value of the instrument to set limits and risk.