By Tova Cohen and Rachelle Younglai
TEL AVIV, June 7 (Reuters) - Israel's securities regulator said on Sunday he plans to introduce a proposal within three months to hold credit rating agencies more accountable for their ratings.
Israel Securities Authority Chairman Zohar Goshen said there should be liability for rating agencies, which have been blamed for contributing to the financial crisis by assigning top ratings to mortgage securities that later dropped in value.
'Rating agencies are being considered as writing opinion,' he told Reuters on the sidelines of an international securities conference in Tel Aviv. 'That is like giving you advice about a movie. We believe it should be a little bit more than that because a lot of trust is given to the rating agencies,' he said.
Global regulators are taking steps to rein in rating agencies like Moody's Corp and McGraw-Hill Cos Inc's Standard & Poor's, both of which have subsidiaries in Israel. U.S. securities regulators have adopted rules to improve the agencies' business conduct and now require more disclosure about a security's underlying assets.
But some policymakers believe more has to be done.
Legislation has been introduced in the U.S. Senate that would allow investors to sue credit rating agencies that recklessly failed to review key information in developing a rating. It is unclear whether the bill has any chance of becoming law.
Goshen said liability should be based on 'gross negligence' and said he was fairly confident he had the support needed to pass the law in the Israeli legislature, the Knesset.
BOND MARKET OPENS FOR TOP FIRMS
Separately, Goshen said Israel's corporate bond market has opened up for top tier companies in recent months. The bond market dried up almost overnight in the wake of the global financial crisis.
'The market has opened for government companies, AA rated companies and banks. I hope it will filter down to A rated and BBB corporations,' he told Reuters at the International Organization of Securities Commissions.
'Whether it will filter down or not will depend on how much the government will raise in the market and it will depend on the interest rate in the government bond market. At this stage we will have to wait and see.'
Israel's government plans to raise 15 billion shekels ($3.8 billion) in tradable bonds in the June-August period. It sold about 50 billion shekels of tradable debt in the government bond market in 2008.
Goshen also said it was important to make sure banks were extending credit to companies. The government has approved 12 billion shekels in guarantees to help banks raise capital and extend credit.
Another problem companies face is the refinancing of existing bonds.
Some 13 billion shekels in bonds need to be refinanced in 2009 and of this, a little over 4 billion shekels have already been refinanced, he noted.
Goshen said he hoped to submit within a month or two a final draft to create a financial court within the Tel Aviv district court.
($1 = 3.93 shekels)
(Reporting by Rachelle Younglai and Tova Cohen; Editing by Diane Craft) Keywords: FINANCIAL IOSCO/ISRAELREGULATOR (rachelle.younglai@thomsonreuters.com; +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
TEL AVIV, June 7 (Reuters) - Israel's securities regulator said on Sunday he plans to introduce a proposal within three months to hold credit rating agencies more accountable for their ratings.
Israel Securities Authority Chairman Zohar Goshen said there should be liability for rating agencies, which have been blamed for contributing to the financial crisis by assigning top ratings to mortgage securities that later dropped in value.
'Rating agencies are being considered as writing opinion,' he told Reuters on the sidelines of an international securities conference in Tel Aviv. 'That is like giving you advice about a movie. We believe it should be a little bit more than that because a lot of trust is given to the rating agencies,' he said.
Global regulators are taking steps to rein in rating agencies like Moody's Corp and McGraw-Hill Cos Inc's Standard & Poor's, both of which have subsidiaries in Israel. U.S. securities regulators have adopted rules to improve the agencies' business conduct and now require more disclosure about a security's underlying assets.
But some policymakers believe more has to be done.
Legislation has been introduced in the U.S. Senate that would allow investors to sue credit rating agencies that recklessly failed to review key information in developing a rating. It is unclear whether the bill has any chance of becoming law.
Goshen said liability should be based on 'gross negligence' and said he was fairly confident he had the support needed to pass the law in the Israeli legislature, the Knesset.
BOND MARKET OPENS FOR TOP FIRMS
Separately, Goshen said Israel's corporate bond market has opened up for top tier companies in recent months. The bond market dried up almost overnight in the wake of the global financial crisis.
'The market has opened for government companies, AA rated companies and banks. I hope it will filter down to A rated and BBB corporations,' he told Reuters at the International Organization of Securities Commissions.
'Whether it will filter down or not will depend on how much the government will raise in the market and it will depend on the interest rate in the government bond market. At this stage we will have to wait and see.'
Israel's government plans to raise 15 billion shekels ($3.8 billion) in tradable bonds in the June-August period. It sold about 50 billion shekels of tradable debt in the government bond market in 2008.
Goshen also said it was important to make sure banks were extending credit to companies. The government has approved 12 billion shekels in guarantees to help banks raise capital and extend credit.
Another problem companies face is the refinancing of existing bonds.
Some 13 billion shekels in bonds need to be refinanced in 2009 and of this, a little over 4 billion shekels have already been refinanced, he noted.
Goshen said he hoped to submit within a month or two a final draft to create a financial court within the Tel Aviv district court.
($1 = 3.93 shekels)
(Reporting by Rachelle Younglai and Tova Cohen; Editing by Diane Craft) Keywords: FINANCIAL IOSCO/ISRAELREGULATOR (rachelle.younglai@thomsonreuters.com; +1 202 898 8411) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.