Standard & Poor's has announced reforms sparked by concerns about how influential credit rating agencies graded US mortgage securities which have triggered huge losses for some investors.
New York-based S&P said it was overhauling its practices to beef up confidence in its credit ratings and to make its ratings process more transparent.
S&P, as well as rivals Moody's and Fitch, has been criticised for being too slow to downgrade its ratings on sub-prime mortgage-related assets which have plummeted in value amid a US housing slump.
Investors often rely on S&P ratings when deciding whether to buy a particular security or other asset such as bonds a company may issue to raise capital. As such, its ratings are highly influential and can have a big effect on the value of a particular security or company.
US and European regulators have launched reviews of the ratings agencies' practices in the wake of mounting losses from mortgage securities which have also sparked big losses at major foreign banks.
The losses, mainly on sub-prime home loans granted to Americans with poor credit, have created a credit crunch on Wall Street and sparked turmoil on global stock markets.
Some critics charge that ratings agencies are not impartial because, in some cases, they help design securities they then subsequently grade.
S&P president Deven Sharma said S&P's reforms would 'strengthen the integrity' of its rating process to maintain investor confidence. The firm is also establishing an Office of the Ombudsman to address concerns related to potential conflicts of interest. It said it would also engage an outside group to conduct an occasional review of its ratings and oversight amid other measures.
