Comisión Nacional Bancaria y de Valores (CNBV) main function is to inform the market about the real risks that the investing public faces in financial intermediation. Regulation is essential for greater transparency in its actions and less exposure to conflict of interest. The Comisión Nacional Bancaria y de Valores supervises 7 Credit Rating Agencies, called Instituciones Calificadoras de Valores (ICVs) in Mexico, within the framework of the Securities Market Law, the General Corporations Law Mercantile and Provisions on the matter.
In accordance with current regulations, among other information, these institutions must have available on their website the meaning and scope of their qualifications, the codes of conduct that govern their actions, the methodologies and procedures they use for the study, as well such as the analysis of the credit quality of the entities or issuers, and any substantial changes in them must be revealed so that they can be consulted by the investing public.
Comisión Nacional Bancaria y de Valores powers over Credit Rating Agencies:
- Carry out inspection and surveillance.
- Make observations and, where appropriate, order the adoption of measures aimed at correcting the irregular facts, acts or omissions that it has detected..
- Impose sanctions of an administrative nature.
- Issue provisions that contain minimum requirements that must be included in its Code of Conduct.
- Determine the means through which Credit Rating Agencies must disclose to the public the ratings they make on securities already registered or to be registered in the National Securities Registry.
- Issue provisions on the financial, administrative and operational information that rating agencies must submit, as well as their modifications and cancellations.
- Revoke their authorization when they commit serious or repeated infractions to the provisions of the Securities Market Law; are declared bankrupt, or agree to its dissolution and liquidation, prior agreement of its Governing Board.
- Authorize their merger or division, with the prior agreement of their Governing Board.
- Require data, reports, records, minute books, documents, correspondence and other information deemed necessary for supervision.
- Order the suspension of the rating service when in its judgment there is a conflict of interest between the client and the Credit Rating Agency.
- Order the suspension of the publicity of the Credit Rating Agencies when in its judgment it implies inaccuracy, lack of clarity, unfair competition, or may lead to error.
- It is important to mention that the ratings issued by Credit Rating Agencies are an opinion on the credit quality of an entity or issue, and in no way represent a recommendation on the purchase or sale of a certain security.
Although each rating agency has its own rating scale, in general the rating levels granted by the Credit Rating Agencies could be grouped into: AAA, AA, A, BBB, B, CCC, CC, C, D. However, for greater In detail, the Comisión Nacional Bancaria y de Valores recommends to review the scales published on the internet pages of each Credit Rating Agency (see below).
The regulation of these types of entities requires that the information they disclose to the public be updated, relevant, timely, of quality and clear. The information provided by the Credit Rating Agencies allows the investor to have reliable reference information for investment decision making.
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