17 April 2009

EP and Council agree on CRA legislation

The compromise reached provides for a greater role for CESR, which will be in charge of registering CRAs' and would provide a single point of entry for the submission of applications.

Parliament and the Council delegations have reached an agreement on the new legislation on Credit Rating Agencies.

 

The compromise reached provides for a greater role for CESR, which will be in charge of registering CRAs' and would provide a single point of entry for the submission of applications. CESR should receive applications for registration and inform competent authorities in all Member State and will also make this information available to the public.

 

National authorities will take the decision on CRAs registration and compliance with the rules and on the possibility of withdrawing an agency's registration should the rules be breached.

 

Moreover, a college of supervisors, representing the 27 Member States authorities, will also be established, to provide a platform for an exchange of supervisory information among national authorities and to improve co-ordination of their activities. The agreement is regarded as a first step forward and the Commission is asked to report on its application by July 2010 with a view to possible new proposals for further streamlining.

 

Non-European ratings will have to be endorsed by an EU agency, established according to this new regulation. This agency will be responsible for determining and monitoring on an ongoing basis whether rating activities of non-EU CRAs comply with the requirements.

 

CRA would have to disclose to the public the methodologies used to adopt their ratings. On structured productes, they should either use different rating categories when rating structured finance instruments or provide additional information on the different risk characteristics of these products.

 

Finally, if the legislation is adopted, a CRA would have to publish annually a transparency report including information on ownership, the outcome of the annual internal review of the independence compliance and a description of the management and analyst rotation policy.

 

The Regulation will be directly applicable in the whole EU 20 days following its publication in the Official Journal. Member States will have six months to take the necessary measures to implement the new provisions. As an exception, the provisions on the use of ratings from non EU agencies, this transition period will last 18 months. Three years later, the Commission will evaluate the effectiveness of the regulation, including the reliance on credit ratings in the EU.

 

Full press release

 

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