As part of enacting comprehensive reforms to the credit ratings system, Congress, in the Dodd-Frank Wall Street Reform and Consumer Protection Act, directed all federal agencies to reduce reliance on and references to credit ratings in agency regulations. Today’s adoption is the Commission’s final step in fulfilling this Congressional mandate.

In its 2011 Final Report, the Financial Crisis Inquiry Commission found that “the failures of credit rating agencies were essential cogs” in the 2008 financial crisis. The report concluded that the “crisis could not have happened without the rating agencies.”

These entities’ ratings were key to the marketing and sales of mortgage-backed securities, relied on by investors to make informed investment decisions — flaws and conflicts of interest notwithstanding. In some instances, Federal regulations required the use of credit ratings.

As the 2011 report noted, the markets’ — and, at times the federal government’s — reliance on credit ratings that turned out to be highly misleading had consequences that reverberated “throughout the financial system.” And not in a good way.

In today’s final rules, the Commission is replacing the references to credit ratings in Rules 101 and 102 of Regulation M with an alternative standard of creditworthiness that relies on credit risk models. This alternative approach is designed to minimize the risk of evasion and manipulation of the new creditworthiness standard.

I support the adoption of today’s final rules. I would like to commend all the Commission staff that worked on this rule and the other rules to fulfill the mandate under Section 939A of the Dodd-Frank Act.