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Alternatives to Credit Ratings Proposed

WASHINGTON (CN) - The Office of the Comptroller of the Currency is asking for comments on alternatives to the use of external credit ratings in regulations that require banks to determine if a security is "investment grade," and in other areas in which banks must make risk assessments.

Federal agencies must replace the use of credit ratings performed by private organizations like Standard & Poor's, Moody's Investor Service and Fitch Ratings, with other forms of determining credit worthiness, under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Comptroller's alternatives would require banks to perform their own assessments as to whether the issuer of a particular security has adequate financial capacity to meet the financial commitments of the offering.

The requirements of Dodd-Frank not withstanding, the banking industry has said that not being able to use credit ratings to comply with federal regulations will be very expensive and that their performing their own assessments is unlikely to produce data anymore useful than that provided by ratings agencies.

The Comptroller will accept comments until Dec. 29, 2011.

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