Risk-Based Credit Examination Act

Floor Speech

Mr. Speaker, I rise in support of my legislation, H.R. 4586, the Risk-Based Credit Examination Act. I thank the chairman and ranking member for their support.

Under Dodd-Frank, the SEC's Office of Credit Ratings, OCR, is required to conduct annual examinations of credit rating agencies on eight review areas. Evaluating each of these eight areas is resource-intensive for both the OCR and the rating agency and is oftentimes redundant when there have been no identified material issues.

H.R. 4586 is a straightforward bill to provide the OCR with discretion concerning these eight reviewable areas during their annual examinations.

Dodd-Frank's increased compliance requirements for nationally recognized statistical rating organizations, or NRSROs, put small credit rating agencies at a disadvantage in the market, chilled competition among rating agencies, and further consolidated power in the largest rating agencies. Additionally, small credit rating agencies were not the cause of the financial crisis and should not be treated as such.

The marketplace needs commonsense reforms like this. By providing discretion to the SEC's OCR for these eight review areas, H.R. 4586 is right-sizing the SEC's oversight of NRSROs and alleviating costly burdens that especially impact the smaller NRSROs.

By adopting a risk-based approach, H.R. 4586 allows for continued oversight by OCR but in a more efficient and targeted manner. It also removes burdensome and unnecessary compliance costs for small rating agencies to promote much-needed competition in the credit rating industry.

Mr. Speaker, I obviously support H.R. 4586, and I encourage my colleagues to support it.

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