The Office of the Comptroller of the Currency (OCC) issued a proposal this week that would scrub references to credit ratings from its regulations, as required by the Dodd-Frank Act. In effect, the rule would end the practice of banks relying on credit ratings to determine the risk of default for underlying loans before issuing “investment grade” securities. Instead, banks will have to makes those determinations on their own.
The agency proposed that issuers of securities backed by mortgages, student loans, and other debt, must have an “adequate capacity to meet the financial commitments under the security for the projected life of the asset or exposure.”
