SEC Chairman Christopher Cox told Congress April 22 that the Commission plans to release by early summer a report detailing the Commission’s examination of rating procedures used by credit ratings agencies. The report, Cox told members of the Senate Committee on Banking, Housing and Urban Affairs, will help the SEC as well as issuers and users of credit ratings in the U.S. and around the world “to address the problems we have seen with ratings of subprime-related products.”

While Cox said it’s premature to describe results of the report, he did say that it “appears the volume of the structured finance deals that were brought to the credit rating agencies increased substantially from 2004 to 2006.” In addition, he said, “during the period of time under examination, the structured products that the rating agencies were being asked to evaluate were becoming increasingly complex, with many employing derivatives such as credit default swaps to replicate the performance of mortgage- backed securities. At the same time, the loan assets underlying these securities shifted from primarily plain vanilla 30-year mortgages to a range of more difficult-to-assess products, such as adjustable rate and second lien loans.” The SEC, he said, is “evaluating whether credit rating agencies adapted their rating approaches in this environment.”

The SEC was given oversight authority over credit ratings agencies in 2006. The Rating Agency Act, put into place June 2007, required credit rating agencies to register with the SEC if they wished to become nationally recognized statistical rating organizations (NRSROs). Members of the Committee debated whether the SEC should have more oversight authority over credit ratings agencies.