Credit rating agencies (CRAs) are required to hold an Australian financial services (AFS) licence and comply with the conditions of the licence.

There are six licensed CRAs in Australia (dominated by three major international CRAs) that provide ratings across a broad range of sectors.

We conducted an industry-wide surveillance of CRAs with a focus on governance arrangements, transparency and disclosure.

We made a number of observations about the activities of the CRAs, leading to some recommendations for change. Our observations and recommendations concern:

• board reporting;
• compliance teams and testing;
• analytical evaluation of ratings;
• human resources;
• monitoring a credit rating, including the monitoring process;
• conflicts of interest, including the process for managing conflicts of interest and rating committee composition; and
• annual compliance reports.