Regulation (EU) No 462/2013
I. General Information
Commission wants better quality credit ratings
Brussels, 15 November 2011 - Credit rating agencies (CRAs) are major players in today's financial markets, with rating actions having 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 makes a country's borrowing more expensive. Despite the adoption of European legislation on credit rating agencies in 2009 and 2010, recent developments in the context of the euro debt crisis have shown our existing regulatory framework is not good enough. So, today the Commission has put forward proposals to toughen that framework further and deal with outstanding weaknesses.
Four main goals of the proposed draft Directive and draft Regulation
1. To ensure that financial institutions do not blindly rely only on credit ratings for their investments.
2. More transparent and more frequent sovereign debt ratings.
3. More diversity and stricter independence of credit rating agencies to eliminate conflicts of interest.
4. To make CRAs more accountable for the ratings they provide.
The EU Regulation on Credit Rating Agencies (CRA)1, (in force since December 2010), was part of Europe's response to the commitments made by the G20 at the November 2008 Washington summit. This Regulation was amended in May 2011, to adapt the Regulation to the creation of ESMA2.
The existing CRA Regulations focus on registration, conduct of business and supervision of CRAs:
(1) registration: in order to be registered, a CRA must fulfill a number of obligations on the conduct of its business (see (2)) intended to ensure the independence and integrity of the rating process and to enhance the quality of the ratings issued. The European Securities and Markets Authority (ESMA) is entrusted since July 2011 with the responsibility for registering CRAs in the EU; 28 CRAs (of which some belong to the same group) are now registered with ESMA.
(2) conduct of business: the existing Regulation requires CRAs to avoid conflicts of interests (for example, a rating analyst employed by a CRA should not rate an entity in which he/she has an ownership interest), to ensure the quality of ratings (for example, requiring the ongoing monitoring of credit ratings) and rating methodologies (which must be, inter alia, rigorous and systematic) and a high level of transparency (for example, every year, CRAs should publish a Transparency Report).
(3) supervision: since July 2011, ESMA exercises exclusive supervisory powers over credit rating agencies registered in the EU and has comprehensive investigative powers including the possibility to demand any document or data, to summon and hear persons, to conduct on-site inspections and to impose administrative sanctions, fines and periodic penalty payments. This centralises and simplifies the supervision of CRAs at European level. Centralised supervision ensures a single point of contact for registered CRAs, significant efficiency gains due to a shorter and less complicated registration and supervisory process and a more consistent application of the rules for CRAs. CRAs are at present the only financial institutions which are directly supervised by a European supervisory authority.
EU rules would apply to ratings of public entities within the EU but also outside the EU provided that the sovereign ratings are issued by a CRA registered in the EU.
|Regulation||(EU) No 462/2013|
|Source||O.J. EU No L (Legislation), Edition 146, Year 2013, p.1|
|Legal Basis||Art. 114 AEUV|
|Legislative Procedure||Codecision procedure|
II. Versions and Legislative History
| (EU) No 462/2013
2. Legislative History
4. Legal Impact
|Amendment|| Regulation (EC) No 1060/2009|
III. CESR / ESMA Announcements (Level 3)
Q&A on Implementation of the Regulation (EU) No 462/2013 on Credit Rating Agencies
IV. Umsetzung in den Mitgliedstaaten
1. Implementation in Germany