EC – Stricter rules for credit rating agencies to enter into force

by Sabrina I. Pacifici on June 30, 2013

News release: “As of 20 June, credit rating agencies (CRAs) will have to follow stricter rules which will make them more accountable for their actions. The new rules also aim to reduce over-reliance on credit ratings while at the same time improving the quality of the rating process. Credit rating agencies will have to be more transparent when rating sovereign states. Michel Barnier, Commissioner for Internal Market and Services, said: “Under the new legislation, credit rating agencies will have to be more transparent and accountable when rating sovereign states. The new rules will also contribute to increased competition in the ratings industry currently dominated by a few market players and will reduce the over-reliance on ratings by financial market participants. This is an important step towards restoring financial stability and trust in financial institutions and will help to avoid further crises.” Credit rating agencies (CRAs) are major players in today’s financial markets. Rating actions have a direct impact on the actions of investors, borrowers, issuers and governments. For example, a corporate downgrade can have consequences on the capital a bank must hold and a downgrade of sovereign debt can make a country’s borrowing more expensive. Despite the adoption of European legislation on credit rating agencies in 2009 and 2010, the developments in the context of the euro debt crisis have shown the need for the regulatory framework to be strengthened. As a result, in November 2011 the Commission put forward proposals to reinforce the regulatory framework and deal with outstanding weaknesses. The new rules enter into force on 20 June 2013…The new regulatory package, which reinforces the existing rules on credit rating agencies, consists of a Regulation and a Directive:

  • Regulation 462/2013 of the European Parliament and of the Council of 21 May 2013 amending Regulation (EC) No 1060/2009 on credit rating agencies Directive 2013/14/EC of the European Parliament and of the Council of 21 May 2013 amending Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision, Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) and Directive 2011/61/EU on Alternative Investment Funds Managers in respect of over-reliance on credit ratings. See also  MEMO/13/571.”

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