US officials have unveiled legislation aimed at improving regulation of credit rating agencies, which were blamed for failing to alert investors about risky securities ahead of the credit crisis.

The proposal, part of a wide-ranging regulatory overhaul proposed by the administration of President Barack Obama, aims "to increase transparency, tighten oversight, and reduce reliance on credit rating agencies," a Treasury statement said. Credit rating agencies such as Moody's and Standard & Poor's would face new rules to reduce conflicts of interest and to increase transparency.

The agencies - Moody's, Standard & Poor's and British-based Fitch - have come under fire for being too slow to alert investors to the dangers of investments based on US high-risk subprime home mortgage loans.

The European Union and Group of 20 leaders have also called for tighter oversight of the agencies.

Under the proposed legislation in Washington, agencies "will be required to provide a much fuller picture of the risks in any rated security through the addition of qualitative and quantitative disclosure of the risks and performance variance inherent in any given security," the Treasury said.

But the statement noted that ratings "cannot be a substitute for investor due diligence," and that as a result, each rating must include "a clear report" on data reliability and probability of default of securities. The proposal also calls for "a dedicated office" within the Securities and Exchange Commission to oversee the agencies.

The Treasury said it would work with the SEC and the president's Working Group on Financial Markets to reduce reliance on credit rating agencies.

The SEC will seek comments on whether to eliminate references to ratings in regulations governing money market mutual funds, for example.