Bonds & Rates
Home›Bonds & Rates›Economy›SEBI proposes a color-coded risk meter for debt securi…
SEBI proposes a color-coded risk meter for debt securities
The regulator would require the “Credit Risk-o-Meter” to map ratings to six colors and be shown across bond offer documents, online platforms, and mobile apps, with updates within 24 hours of any rating change.
The Securities and Exchange Board of India (SEBI) has proposed a new visual “Credit Risk-o-Meter” to help investors interpret credit risk in debt securities, especially retail investors, according to a LiveMint Markets account of the regulator’s consultation paper.
SEBI said conventional credit ratings like AAA, AA+ and BBB- can be hard to understand. Under the plan, existing credit ratings would be mapped to six risk levels, each assigned a color, with AAA securities labeled as the “lowest credit risk” in “Irish Green,” and AA+, AA and AA- categorized as “very low credit risk” in “Chartreuse.”
SEBI also wants the credit rating itself and the credit rating agency’s name shown beneath the meter. Where multiple agencies rate a security, the meter would be based on the lowest rating, while all ratings would still have to be disclosed.
The proposal would require the meter to appear in offer documents, abridged prospectuses, private placement memorandums and advertisements, and on web and mobile platforms run by online bond platform providers. SEBI added that it would cover only credit risk, not market or liquidity risks, and would require prompt communication of any meter changes, including updating within 24 hours after receiving information about a rating change.