The Philippine Securities and Exchange Commission (SEC) has unveiled a sweeping regulatory overhaul of credit rating agencies (CRAs), a move analysts describe as one of the most consequential capital market reforms in recent years. The draft memorandum circular, released for public comment on July 10, 2026, seeks to replace the 2015 Implementing Rules and Regulations of the Securities Regulation Code with a comprehensive accreditation and supervisory regime.
Why the 2015 Rules Needed Replacing
The existing framework, enacted over a decade ago, failed to keep pace with the evolution of Philippine capital markets. According to the SEC’s consultation paper, credit rating agencies perform a foundational function by reducing information asymmetry between issuers and investors. For retail investors in particular, a credible, publicly available rating is often their primary basis for assessing credit risk before committing their savings. The 2015 rules, however, lacked robust provisions on analyst independence, conflicts of interest, and transparency—gaps that became increasingly untenable as the corporate bond market expanded.
Key Provisions of the Proposed Framework
The draft circular introduces minimum capital requirements of P50 million upon accreditation, rising to P70 million after a three-year transition period. The SEC said this would ensure financial resilience and enable agencies to invest in staff, systems, and analytical capabilities. The proposal also mandates that a majority of any CRA’s board, including its chair, be independent directors, and expands “fit and proper” requirements to cover controllers, directors, senior management, compliance officers, and rating analysts. Business development and analytical functions must be separated, and lead analysts are subject to mandatory rotation with a two-year cooling-off period.
Expanding the Scope of Regulated Instruments
Beyond corporate bonds and commercial paper, the proposed rules extend regulatory coverage to structured products, sukuk, covered bonds, and sustainability-linked instruments. Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., noted that aligning the framework with international standards is particularly important because the Philippine bond market remains relatively underdeveloped compared with regional peers. “One of the biggest constraints to market deepening has been information asymmetry between issuers and investors, particularly for smaller companies and more complex debt instruments,” he said.
Market Impact and Investor Confidence
Stronger regulation of credit rating agencies could improve the credibility, consistency, and independence of credit ratings, helping reduce informational barriers that make it difficult for investors to assess credit risk across a broader range of issuers and securities. The reforms also support the SEC’s efforts to broaden retail participation in the fixed-income market and encourage more companies to raise funds through public bond issuance rather than relying primarily on bank financing. Arce characterized the proposed framework as “less a regulatory tightening exercise and more an investment in market infrastructure”.
The public comment period closed on July 24, 2026, and the Commission is expected to finalize the rules in the coming months. For a market that has long aspired to deeper liquidity and broader participation, the overhaul represents a critical step toward aligning Philippine capital market infrastructure with global best practices.
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